What Does the Stability Treaty do?
- The Treaty promotes responsible budgeting across 25 member states.
- The Treaty provides Ireland with access to emergency/stability funding at low interest rates should we need it in the future following our bailout programme. This is the stability and certainty that Ireland needs.
2. How much of this Treaty is new?
Very little in the Treaty is actually new. Most of its provisions (particularly rules on balanced budgets and our national debt) were already provided for in the Stability and Growth Pact (SGP) and in six pieces of legislation (the “Six Pack”) implemented in 2011 to reinforce the SGP.
The rules of the SGP have been in place since the 1991 Maastricht Treaty and have been breached on a number of occasions – including by the largest member states.
One important new feature is that member states will no longer be able to break the rules without consequences.
Under the Treaty the rules will now apply equally to all Member States. This is crucial for Ireland.
3. How does the Treaty help jobs and investment?
To grow our economy and to give confidence to multinationals that provide investment and jobs in Ireland, we need sensible national budgeting, stability in the markets, and a strong euro. Without these factors, we will put the stream of investment coming into Ireland at risk.
A Yes vote will bring about certainty and the conditions we need to protect the jobs we need and create the jobs we need.
A number of major multinationals, including Microsoft and PayPal, have publicly supported a Yes vote in recent weeks, as well as a number of business groups like the IDA, IBEC and the Small Firms Association.
4. Will the Treaty solve the Eurozone crisis?
The Treaty won’t solve the crisis on its own, but it is a vital tool in restoring stability and confidence to the Euro area. More action will be required in the years ahead to permanently solve the crisis.
5. What are the benefits of Ireland’s membership of the Euro?
The euro has been of huge benefit to Ireland:
- It has helped to increase trade from Ireland to the other eurozone countries by 43% since 2002.
- It has removed the foreign exchange costs with Ireland’s trading partners in the Eurozone.
- As the only English speaking country using the euro helps us generate more Irish jobs – witness the recent investments by Paypal, Sky, Eli Lilly, HP, Microsoft. These companies want to be in a stable country that uses the euro.
6. What is the European Stability Mechanism (ESM)?
The European Stability Mechanism (ESM) is a rescue fund of €700 billion. It is being established to provide loans to eurozone countries that need emergency funding. The fund is guaranteed by members of the eurozone. If we want to be able to access this bailout fund in the future, we need to ratify the Stability Treaty.
7. Is access to the ESM bailout fund dependent on ratifying the Treaty? And if so, why?
The Treaty makes it clear that we must vote Yes to the Treaty in order to qualify for funding from the ESM.
This is a perfectly logical requirement. The countries that are providing the money for the ESM obviously need some assurances that they are not putting money into a black hole. It is only fair that all of the countries that can access the ESM are signed up to the same sensible budget rules set out in the Treaty.
8. I thought the Government had promised to get us out of a situation where we need bailouts? So why do we need the ESM at all?
The Government is committed to returning to the markets when the bailout programme expires in 2013, and we are on track to achieve this.
It’s the confidence, investment and growth generated by our access to the rescue fund that will help us emerge from the bailout.
It’s also like a home insurance policy – you cannot get mortgage financing without it. You expect never to use it, but the fact that you have it gives you and your banks confidence and certainty.
9. But can’t we get funding from other sources, like the IMF?
We could apply for funding from the IMF if we can’t get access to it elsewhere, but there is nothing to indicate that the IMF will give it to us.
We must draw a distinction between “applying” for funding and “accessing” funds. The IMF has already extended funding to Ireland well beyond our quota.
The IMF agreed to this exceptional level of funding to Ireland because the European authorities are providing two-thirds of the programme funding. This reduced the risk on the IMF on having their loans repaid.
The IMF has made it crystal clear in the negotiations of the Greek, Irish and Portuguese bailout programmes that:
- they will not provide unilateral assistance to Eurozone countries
- they have only been prepared to contribute to a bailout if Europe takes the lead
- the amount of the IMF contribution depends on the amount of the European contribution.
If Ireland votes no in the referendum, Ireland will not have access to ESM funds, therefore no funding to match IMF funding.
10. Does the Treaty force us to make huge cutbacks? Will it be an “austerity treaty”?
Ireland wants to be back in control of its own economic destiny.
A Yes vote will have no impact on the Government’s overall budget targets. The plan to reduce the deficit to under 3% of GDP by 2015 will not be affected by the Treaty. The Government has already announced its €17 billion Infrastructure and Capital Investment Programme running until 2016. The Treaty will have no effect on this plan.
The real “austerity” would occur if we voted No, cut ourselves off from the ESM, and then required funding in the future. We would then have to close our deficit by speeding up the progress of adjustment.
11. Will the requirement to reduce our debt to 60% of GDP force us into huge austerity for many years?
This is one of the parts of the Treaty which is there already in EU law. This will not change even if we vote No.
The process of reducing our debt to 60% of GDP will be a gradual process, happening over many years. Ireland will not have to begin this process until 2019.
We expect economic growth to do most of the work. In the 1990s, we reduced our debt-to-GDP ratio from 95% to 35% through economic growth. We can do this again.
Reducing our debt ratio is in our own interests irrespective of this Treaty. Otherwise, we will continue to spend a huge amount of our taxation revenue (20% at present) paying interest on our national debt, when it could be spent on schools and hospitals.
12. Does the Treaty ban future stimulus measures?
Ireland was to the very forefront of those seeking to prioritise growth in this Treaty – it’s right there in black and white, in its very first article. Also, a series of growth-enhancing initiatives were agreed by EU leaders on the same day they agreed the Treaty.
13. Will the Treaty affect Ireland’s corporate taxation rate?
No. Corporation tax is not an issue for the new Treaty and the Government’s firm position in the matter has not changed. In fact, the word “tax” doesn’t even appear once in the Treaty text. This Treaty has nothing whatsoever to do with taxation.
14. Is the treaty forcing Irish taxpayers to pay the debts of the banks?
This is nothing to do with the Treaty. Michael Noonan is currently re-negotiating the burden on Irish taxpayers from the previous Government’s reckless bank bail-outs.
But even without any bank debt costs, there is still a €13 billion gap between the Government’s spending and its revenues, as a result of the wasteful spending policies of the past. Nobody else can fix this for us. And we have to fix it to restore stability and investment, and get back to growth.
15. Are we inserting the entire text of Treaty into our Constitution?
No, the text of the Treaty is not being inserted directly into the Constitution.
The Constitution is being amended to include a paragraph which will allow the Government to ratify the Treaty, and allow the Oireachtas to implement the terms of the Treaty in Irish legislation.
All referenda on European issues since 1972 have been done in the same way.
Contrary to what the No campaign are saying, the amendment does not make the Treaty part of our Constitution. It simply allows us to do what is necessary to ratify and implement the Treaty, no more than that.
16. If we vote No, will there be a 2nd referendum?
We will only have one opportunity to say Yes.
Previous EU treaties like Nice and Lisbon needed all Member States to ratify them before they could take effect, giving Ireland and every other Member State a veto over ratification.
The Stability Treaty can take effect once 12 of the 25 Member States have ratified it, so no one country can veto its implementation. The Member States who ratify it will just move ahead and implement it, leaving Ireland behind. So there would be no demand for a second referendum.