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Fiscal Treaty

New Fiscal Treaty For Ireland by Annette J Dunlea

          25 national leaders have agreed tough new budget rules to be enshrined in their national law.The compact treaty is about managing budgets.The fiscal compact will now go before national parliaments and, in the case of the Irish Republic, a referendum.The treaty will take effect once 12 of the 25 states have ratified the pact. If states do not ratify the treaty, they will be blocked from bailout funding.The tighter spending rules,which include a prohibition of deficits of more than 0.5 per cent of total economic output, may limit governments’ room to manoeuvre in their response to tough economic times.The new deficit limits do make exceptions, including for cases of severe recession and certain unexpected economic circumstances.
          “I am confident the referendum will pass. This is not an EU Treaty, this is an inter-governmental agreement between 25 countries therefore Ireland cannot stop this, once it’s ratified by 12 countries it moves on,” Enda Kenny said.The Taoiseach said that there would be a sub-committee of the Oireachtas set-up to pave the way for the referendum, as was done for the Lisbon Treaty.Enda Kenny it was “like a house insurance policy: you hope you’ll never need it, but it’s good to know it’s there.”
           The treaty is short and clear.Here follows a summary of it. “Considering their requirement, as EU members, to think of their economies as a matter of interest for each other.Looking to promote stronger economic growth in the EU, and looking to coordinate their economic policies more closely to try and achieve this. Bearing in mind that governments need to maintain sound public finances, and not to let their debt become unmanageable, in order to help guard the stability of the euro; and remembering that this requires the introduction of rules such as a ‘debt brake’ and an automatic mechanism to correct any budget short falls and that their general government debt does not exceed 60% of the size of the national economy. Remembering that as EU members, countries must avoid any measures which could put the EU’s overall objectives in jeopardy. Bearing in mind that EU leaders, on December 9 2011, agreed new rules on the setup and architecture of the Eurozone, on top of the EU’s founding treaties. Bearing in mind that the goal of countries is to incorporate the provisions of this treaty into EU law as soon as possible.Welcoming the European Commission’s plans for improving oversight of member states which are struggling financially, and noting its intention to come up with more plans which would, for example, require each country to give advance notice whenever it intends to sell new government bonds. Expressing their willingness to support the European Commission’s medium term plans which will further strengthen this deal. Noting that any powers used by the European Commission have been given to the Commission by previous EU treaties”.
          It further states:”Noting that the application of the ‘balanced budget rule’ in Article 3 will require countries to set medium-term objectives for lowering their debt, and to compile a calendar of when they will cut their spending so that this can be achieved. Noting that these targets will be updated regularly on the basis of a method agreed by every country.Noting that progress in reaching these targets should be examined under the terms of existing EU law. Noting that the automatic mechanism to limit budget overspending should be geared towards bringing countries back into line with these targets.Noting that the European Court of Justice should be given the power to examine whether each country has correctly adopted the ‘balanced budget rule’ mentioned above.Recalling that current EU law allows the European Court of Justice to impose financial penalties on EU members which fail to follow its judgments, and recalling that the European Commission has set out rules on how these penalties can be imposed.Recalling that countries whose general government debt is larger than 60% of the size of the national economy are obliged to reduce their debt, at a guideline rate of 5% per year. Bearing in mind the need to respect the roles of social partners in each country.Stressing that this treaty does not alter the conditions under which any country is receiving cash from the EU, its member states or the IMF.Noting that the Eurozone cannot work properly without participating countries moving towards a joint economic policy where they take all action necessary to ensure the proper functioning of their currency.The European Parliament, and the national parliaments of participating countries, will organise conferences to discuss budget policies and other issues dealt with by these treaties. These will involve members of the relevant committees of the European Parliament, and the budget and finance committees of each national parliament.This treaty shall be approved by participating countries in accordance of the requirements of their own national laws. Official papers from each country,confirming their approval of this treaty, will be deposited with the General Secretariat of the European Council .This treaty will take effect on January 1, 2013, provided that 12 Eurozone countries have approved it by that date. If 12 Eurozone countries have not approved it by then, it will take effect on the first day of the month after the 12th Eurozone country approves it.EU member states who are not participating in this treaty may choose to join it at a later date. Other countries will join the treaty by approving it and lodging official papers in Brussels. When a new country joins, the treaty will be translated into any of its official languages which are also working languages of the EU, and an official translation will be filed in Brussels.Within a maximum of five years after this treaty has come into force, the participating countries will consider its effectiveness and take the necessary steps to transfer its substantial points into the laws of the European Union.”
          Enda Kenny signed the treaty. Kenny announced earlier this week that the text would go to a referendum.The treaty will enter into force once 12 of the 17 EU member states that use the euro as their currency have ratified it.”The treaty is an important part in our global strategy to restore stability in our European finances,” said Barroso.”This agreement and its binding rules…signals the irreversibility of the euro and the very important step forward in European integration,” Barroso said. “This treaty represents the very culture of financial stability that is the pre-requisite for a true economic union.”Signatories commit themselves to enshrine a debt brake in national legislation and to ensure their keep their budget deficits do not exceed 3% of gross domestic product.Known as the “The Treaty for Stability, Co-ordination and Governance”, paves the way towards closer political and economic integration in the eurozone.Of the bloc’s 27 members, only the United Kingdom and the Czech Republic decided not to sign the agreement.The fact that two EU states chose not to approve the document forced the signatories to set up the new rules as a separate treaty, rather than integrating them into EU law.

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