Monday 29 May 2017

Ireland is not able to delay new Euro fiscal compact

Van Rompuy outlines the strict new budget rules for 26-member Europe

Donal O'Donovan and Maeve Dineen

IRELAND will not be able to hold up ratification of a new European treaty, even if a referendum on the agreement is required in this country.

It is the first time since Ireland joined the EEC in 1973 that an important treaty can move ahead without an Irish 'yes' vote.

The new deal could come into force with the backing of just nine countries, with others joining later.

It means agreement could be fast tracked within months, in an effort to reassure the markets that the euro is stable.

Draft proposals emerged last night of an intergovernmental agreement, or treaty, aimed at binding eurozone countries into tighter budget rules. The proposal is an effort to restore confidence in the euro.

For the first time the deal could come into force without all members signing up to the agreement.

After the initial nine launch the agreement, other eurozone countries could then sign up to the deal and join what has been dubbed the "fiscal compact" at a later stage.

EU members, like Sweden and Poland, that do not use the euro would also be free to join the compact. The UK has ruled out participation.

Last night a number of legal experts said it was still possible for the new rules to be agreed in Ireland without the need for a referendum.

"The draft document will be looked at carefully by the Attorney General. There are two critical areas: the framework in which the agreement will operate under, and the exact wording of the binding commitments that each member state will sign up to," one legal source said last night.

If the new rules can be agreed under a so-called "enhanced co-operation" arrangement, no treaty changes would be required.

But the draft document appears to be a mixture of "enhanced co-operation" and separate free standing international agreements, which would require a referendum in Ireland.

The eight-page draft document was sent by European Council President Herman Van Rompuy to political leaders around Europe last night.

It was sent out as influential credit rating agency Fitch said it believed a comprehensive solution to debt crisis was "beyond reach".

Fitch put a number of the eurozone economies, including Ireland and Italy, on watch for potential downgrades. It reaffirmed France's top-notch triple-A rating, but warned that the outlook was negative over the longer term.

Co-operation

The Van Rompuy draft is the result of a deal agreed by 26 of the 27 European Union countries last Friday in Brussels, to consider greater co-operation on budgets in an effort to end the debt crisis.

The proposals will be discussed at a meeting in Brussels next week, though it's not yet clear whether finance ministers or government officials will attend the session.

The process is moving rapidly. Final agreement by governments is expected in January.

That will be followed by a European leaders' summit in late January or early February.

Many governments will be able to move a deal through their home parliament for ratification within weeks of that summit.

It means that a nine-country block could have moved to the new regime by as early as March next year. Once that nine ratify the deal, it will come into force. It will then become binding on each subsequent country that ratifies it as they sign up.

What are the new tighter budget rules?

• Countries must agree to keep budget deficits below 3pc of gross domestic product (GDP), and hold national debt below 60pc of GDP.

• The targets are already set out in the "Maastricht criteria" but have been broken routinely by almost all European Union members over the intervening period.

• Countries will hold their primary deficit, which includes government spending except the cost of interest repayment, below 0.5pc of GDP.

This German-inspired "debt break" is dubbed the "Golden Rule" in the proposals. It must be signed into law or into the constitution of all countries.

The biggest change is the ability to punish countries that break the rules.

For the first time countries that break the rules could be taken to the European Court of Justice by a fellow member state.

Irish Independent

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