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Dáil Éireann debate -
Wednesday, 18 Apr 2012

Vol. 761 No. 3

Thirtieth Amendment of the Constitution (Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) Bill 2012: Second Stage

Tairgim: "Go léifear an Bille an Dara hUair anois."

I move: "That the Bill be now read a Second Time."

I wish to share my time with the Minister of State, Deputy Creighton.

Is that agreed? Agreed.

Ireland is a good country with a proud people and it will recover. The past three years have tested us, our democracy, our values and our determination, but we have not been found wanting. This is because what the Irish people want is nothing more than their due: to live in a country where they can find decent work, have a home, take care of their family and watch their children grow up in the company of their friends. We are elected to this House as stewards of that birthright, public representatives whose task, above all, is to act in the interest of the Irish people, not only for today or tomorrow but for our children's future as well.

There are differing views in this House about what represents the best interest of those who elected us - that is politics - but there are some facts that simply cannot be denied, or swept aside. Ireland may be an island, but the borders of its trade, currency and workforce stretch across oceans. We are a country that is deeply embedded in the global trading system, exporting 80% of everything we produce, we are a member of a 17 country currency, the eurozone, we are part of a European market of 500 million people, and now we are dependent on international institutions to pay wages and pensions and keep our hospitals, schools and other public services running. Our living standards depend on our reputation as a strong and stable place to do business, and until we can sell Irish Government bonds on the international markets again, our living standards are directly dependent on support from our European partners. Let us be clear about one thing. The euro is our currency. It is the money in our pocket - the money we spend when we have it, the money we save when we can. The health and future of the euro matters personally, to each of us.

As I said at the sub-committee yesterday, in the second half of last year Europe and the euro currency was under massive pressure. We all saw what happened in Greece. We all saw multiple ratings downgrades even amongst previously invincible AAA countries. We all saw global economic powers like Italy under severe pressure. Citizens using the euro wondered "Should I change my money into another currency?", "Are my savings safe?" and other such questions fundamental to any person, family or business. All of this was happening despite good news from some sources, including here in Ireland, where our recovery programme was on track, with growing exports and good news in terms of foreign direct investment.

Late last year, then, it was clear that the euro was under threat and economies were struggling to fund themselves. There was a growing crisis, not just for Europe but on a global scale; a crisis where Ireland, as an open exporting country was very exposed to having its recovery derailed unless something was done at a eurozone and European level. It is often under-estimated how much progress has already been made in addressing the eurozone crisis in terms of early warning systems, much enhanced financial regulation, bank recapitalisation requirements and, overall, the retrofitting of the supporting architecture that should really have been there when the euro was introduced.

Last December and then right through Christmas, the new year and January, Ireland and our fellow European member states sat down to negotiate a new and important part of this toolkit, an agreement with the status and weight of an international treaty which committed 25 states, including all eurozone members, to responsible budgeting and better arrangements on how eurozone countries work together and help each other. It is that deal which we negotiated, called the stability treaty, which I am asking the Irish people to support.

The other crucial tool available is, of course, the firewall in the form of the European Stability Mechanism or ESM, which any country ratifying the stability treaty can have access to. As most Deputies know already, if any country does not ratify the stability treaty, it does not have access to the ESM.

This is a treaty on stability and is about ensuring a stable euro. It is about confidence abroad and maintaining and enhancing the influence we have been rebuilding with investors and our European partners. In particular, for multinational employers, from whom so many announcements have come in recent months, their decisions have been thanks to our renewed political and economic stability and, above all, the determination of the Irish people, despite great sacrifices, to restore Ireland's economic health. As Minister for Foreign Affairs and Trade, I have personally heard directly from these investors and employers around the world. They want to do business in Europe and they are convinced by what Ireland has to offer as a European base. However, they need reassurance that the euro currency is stable and that Ireland's is a stable and well managed economy at the heart of the eurozone.

In very large part, this treaty reiterates and reinforces rules already in place through the revised Stability and Growth Pact and the recent EU legislative package on governance and economic management. Giving these higher legal status helps ensure that everyone, big or small, is bound by the same rules in order to give us a level playing pitch.

The treaty is about managing our debt in such a way that, over time, taxpayers' money goes not into servicing debts but more and more into public services and targeted growth initiatives to create jobs. As a small, open economy, we have seen in dramatic fashion how quickly our public finances can become unstable in the face of global economic turbulence. We cannot allow this to happen again. Even if we were not party to the treaty, as a matter of proper economic management we would have to reduce out indebtedness over time. Those who make claims about the treaty imposing austerity seem to believe we can run a deficit for ever or accumulate debt without limit, but we cannot. That is not a matter of ideology; it is a matter of mathematics. Anyone who says otherwise is not being honest with the people.

This treaty is about having an insurance policy and making sure we have access, if needed, to the ESM funding that allows us to fund those public services and all Government spending. We are determined to return to the financial markets next year and to stand on our own two feet again. We are on target with our programme and sentiment towards Ireland is positive. Yet, we cannot control world events and the world economy. Markets need to know there is a backup in the form of the European Stability Mechanism and we can only access that if we ratify this treaty on 31 May. We hope and intend not to need the ESM but what Ireland does not need is to be excluded from it, with the associated uncertainty.

The stability treaty is crystal clear about what it is for. Its very first article states that its purpose is to support "the achievement of the European Union's objectives for sustainable growth, employment, competitiveness and social cohesion" - jobs, real economies and fairness. To reinforce that point, when the treaty's text was agreed among EU leaders at the end of January, they agreed a growth programme in parallel with it. The Irish Government was a leader in efforts to ensure this growth programme and in ensuring growth was at the heart of the treaty itself.

On 27 March last, the Government decided 31 May would be the date for the stability treaty referendum and announced the wording of the proposed amendment to the Constitution, the Bill which we are now debating. The Bill contains the proposed amendment to the Constitution, first, to ratify the stability treaty itself and, second, to enable the Oireachtas to adopt any legislation necessary in order to implement its provisions. Contrary to what some have claimed, we are not inserting the treaty into our Constitution. We are ensuring that our constitutional arrangements enable us to ratify the treaty.

Announcing the referendum date on 27 March allowed for 65 days of debate before polling day. The Government is determined, both here in the Oireachtas and among the general public, that there will be a full and thorough debate on the stability treaty. I want to pay particular tribute to the sub-committee of the Oireachtas Committee on European Affairs and its Chairman, Deputy Hannigan, for their work both before and since Easter in debating the stability treaty with a large variety of speakers. I participated there yesterday and I know its deliberations will inform the debate in both this House and the Seanad in the coming week. I also look forward to the sub-committee's report in the coming weeks.

It is the right and the duty of Government, as before, to play a part in informing the public, and one innovation in this referendum debate will be that every household will receive a copy of the treaty in Irish and English, along with a short explanatory text. The Referendum Commission, established just over eight weeks before referendum day, will also do its work and, of course, I respect its independence in that. All of us in the House, a minority of whom will campaign against the amendment, should, and no doubt will, be out there explaining and debating with the people, as is our obligation as public representatives. I know there are attempts to appeal to people to use their vote to register a protest of some form. These are difficult times, and with difficult decisions having been made to help fix our economy, it is understandable some people feel angry that they are contributing so much after all the economic mistakes that have been made during the previous decade. We are all angry that this country has found itself in the position it is in but the Government is determined to fix this.

I am voting "Yes" because I believe it helps us. My point today is that voting "No" genuinely will not help Ireland's recovery, it will hinder it. If the stability treaty is about anything, it is about making sure grave mistakes are not made again. It is about getting a sustainable, fair and people focused economy here in Ireland and across Europe, where public money is available for public services and job incentives, not for paying down debt. In addition, as I have said on many occasions, it is about the euro in our pocket.

When we are voting on 31 May, let us not use our vote on issues unrelated to the treaty. Let us, including all of us here in this House, keep the debate focused on the stability treaty and Ireland. I am heartened to see early evidence already from civil society groups, energised by this vital national issue and poised to play their part in the campaign. To see farmers and small business owners call for support for the treaty is a sign of how fundamental a stable eurozone with Ireland at its heart is for all of us. I do not claim and have never claimed that the stability treaty is the solution to all our problems but it is a very important part of the solution - for a stable euro, for investor confidence, for recovery and for a vote of confidence in our future. I urge the House to support the Bill and I urge the people of country to support the referendum on 31 May.

I thank the Tánaiste for sharing time to allow me this opportunity to address the House on this crucial Bill. It goes without saying this is extremely important legislation as it will facilitate the holding of a referendum on the stability treaty on 31 May. While the debate began many weeks ago on the airwaves, it is appropriate that we begin the formal debate in the Houses of the Oireachtas. I look forward to engaging fully as the debate broadens out beyond the Houses in the weeks ahead. I will be working hard with my Government colleagues to ensure the support of the people for the treaty on 31 May. I enjoin the Tánaiste in commending the ongoing work of the sub-committee of the Joint Committee on European Union Affairs under the chairmanship of Deputy Hannigan. The sub-committee has already heard from a broad range of voices throughout society as well as contributions from a variety of our EU partners. The interventions 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 the considered and tempered approach persists.

The public will go to the polls on 31 May and will need the full facts of what is in the treaty and details on the implications of its ratification for Ireland. I spoke of the need for adequate, clear information to be made available to the people even before a decision was taken to hold a referendum on the treaty. In response to this genuine need for information, the Government will shortly circulate a copy of the stability treaty to every household in the State. This was not done in the case of recent referendums but the Government's view is that the need for first-hand information is sufficiently pressing to justify this innovative step. I appreciate that some who oppose the treaty have welcomed this move by the Government and I welcome the fact that all sides in the debate at least agree that the people need information on the proposition before them to make an informed decision.

The full text of the treaty will be accompanied by brief explanatory material intended to highlight the main elements of and related to the treaty. Later this week the Government will launch a dedicated website concerning the treaty. This will provide access not only to the text but also to a range of explanatory material. It is the Government's sincere hope that this information, which 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 fulfil its mandate to explain, independently of Government, the subject matter of the referendum proposal, to promote public awareness of the referendum and to encourage the electorate to vote at the polls on 31 May.

Before outlining details of particular provisions of the treaty I wish to provide some context. We are all aware that we have experienced a profound crisis in the euro in recent years and we are not out of the woods yet. That much is clear. Our currency, the money in our pockets, has had its stability, credibility and its future called into question. Why should this be of concern to the people? First and foremost, instability in the euro area has impacted negatively on the interest rate at which euro area countries, including Ireland, can borrow money in the international financial markets. This considerable 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, hospitals, the Garda and all the other public services and social payments that are relied upon by citizens every day.

A lack of stability introduces added uncertainties to investment decisions made by multinational corporations. These firms are highly mobile in terms of the destinations for their investments. It also affects the investment decisions being made by our indigenous companies, especially 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 on job-creating investments or, in the case of multinationals, find an investment location with less volatility. Restoring stability to the euro is a critical step to extract ourselves from our current predicament. The treaty will play an important part in that effort. As the Tánaiste has stated, it is not sufficient on its own but it is an essential element. For this reason Europe's response to the current crisis has been multifaceted. 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. The permanent successor to the facility, the European Stability Mechanism, ESM, has now been put in place and is due to enter into force in July, one year ahead of schedule. We have also put in place the European semester which is overseeing the implementation of structural reforms set out in the national reform programmes provided by each member state. In addition, the European institutions have been mindful of the need to put in place robust and convincing firewalls to prevent negative spillover effects from one member state to another.

During the course of this crisis we have seen all too vividly the remarkably pronounced level of interconnectedness that exists among members of a currency union. What happens in one member state can have and often does have serious repercussions on all the others. I am pleased to note that the review of the adequacy of the overall ceiling of the EFSF and ESM conducted recently 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 possible. The recent agreement among finance ministers constitutes a strong and credible response and it is to be welcomed.

One further element of the jigsaw that comprises 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 has held this view for some time. Without growth the burden of getting back on track would be much greater. I am pleased that this is a widely held view among our European partners. They now appreciate the need for a balanced response to the challenges we face in the euro area. This is 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. It makes the problem far worse for us now and for the generations to come.

This brings me to the contents and implications of the stability treaty. It will be useful to outline to the House the key elements contained in the new treaty. Some of the provisions have already been the subject of misrepresentation in the House and beyond and it may be helpful to set the record straight. One element is the introduction of a deficit brake at national level. This will require member states to have an automatic correction mechanism in their national laws to ensure they keep within the rules and abide by the requirement for countries with debt in excess of 60% of GDP. This means keeping budgets in balance or in surplus. Another element is 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 one twentieth per year. There is also 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. There is an agreement to support commission recommendations in respect of 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.

There is 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 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 judgment 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. Of particular relevance to the Houses of the Oireachtas is the provision in the treaty for a conference of representatives of the relevant committees of the European Parliament and the national parliaments of countries participating in the treaty to discuss budgetary policies and other issues covered by the treaty. Arrangements are in place for the treaty to enter into force on 1 January 2013 once 12 euro area signatories have ratified it according to their national requirements. Countries then have one year to transpose measures into national law.

The treaty concludes with a provision that within five years at most, following its entry into force, the necessary steps will be taken with the aim of incorporating the substance of the treaty into the European Union's legal framework. Significantly for Ireland and other countries currently in stabilisation programmes, it is made clear in the preamble to the 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 provides 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 a country receiving the support of its partners under the ESM should be prepared to run sensible budgetary policies. That is as much in Ireland's interest as in anybody else's. None of the provisions of the stability treaty, whether new or pre-existing, should cause any concern for this State. The requirements placed on us by our EU-IMF programme go considerably further than what is envisaged in its provisions. What the treaty will do is level the playing field so that all member states - large or small, in the north or in the south - will in future be held to account. Such a development is good news for Ireland. It is why the Government has signed up to the treaty and why we are actively advocating for its ratification in the referendum on 31 May.

Ireland is already delivering on its commitments, as acknowledged across the European Union and far beyond. An arrangement whereby all member states play by a set of transparent rules and are seen to do so is good for Ireland. Such an approach will bring credibility and confidence to the euro and stability to the financial markets. That is in our interest. As a small, open trading economy, we need to pay our way in the world. It is a simple reality that, over the medium term, one's income must cover one's spending. This rule lies at the heart of the treaty. It is a question of good housekeeping. 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 and to ensure we do not leave that legacy for those who come after us.

That is what this Government is doing. Failing to do so, on the other hand, would be unfair to future generations and 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 at the outset, 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 and is precisely what the stability treaty is about. It is a necessary step in the process of restoring confidence and stability and it is important that we ratify it.

Debate adjourned.