The new Treaty requires us to correct our debt to GDP ratio at a sufficient pace when it is above the 60 per cent threshold. I would point out that the pace of the required correction under the new Treaty is the same as is already required under the reforms of the Stability and Growth Pact as part of the so-called ‘six pack' of legislative reforms. Specifically, we will be required to reduce our debt to GDP ratio annually by one-twentieth of the difference between the actual rate and the threshold rate of 60%. I would point out that a transition period will apply for all countries that are currently subject to the excessive deficit procedure on the basis of the deficit criterion, including Ireland.
In terms of the fiscal implications of this debt correction rule, it is important to remember that it is the ratio of debt to GDP that is important. In other words, on the basis of reasonable assumptions, we can expect economic growth to do much of the "heavy lifting". Furthermore, I think it's also worth pointing out that, irrespective of our international commitments, we need to get the debt to GDP ratio down to more manageable levels. Otherwise we will just spend more and more of our revenues on servicing the debt burden, which reduces the amount we can spend on education, health, social welfare, and other areas.
Budget 2012 forecasts that Ireland's General Government debt to GDP ratio will be 115% by 2015 down from 119% in 2013. In light of this, the present focus is on improving the General Government balance and stabilising the General Government debt position. Continued fiscal vigilance will gradually improve our public finances and reduce the General Government debt.
Before concluding, it is also appropriate at this point for me to highlight the NTMA's recent success in switching around €3.5 billion worth of bonds due to mature in 2014 with bonds maturing in 2015 at a broadly similar annual interest rate. This will smooth the maturity profile of Irish debt, and is a reflection of the improved market sentiment for Irish government paper.
