New EU fiscal treaty will need nine countries to ratify it
DETAILS of the new draft EU "fiscal compact" designed to mend the area’s debt crisis emerged today including news that it will not be introduced unless nine of the 17 eurozone countries participating in it ratify it.
The intergovernmental treaty, which could prompt a referendum in Ireland if it means changes to our constitution, will also need to be voted on by each national parliament before being introduced.
According to the draft, any golden rules or major economic reforms will have to be co-ordinated between all 27 EU member states including Britain – giving the country equal participation in discussions despite British Prime Minister David Cameron vetoing it and walking out of a key summit in Brussels last week.
All 27 countries will also be kept abreast of developments at twice yearly summits for the 17 members of the eurozone although the new rules will not apply to the former until they join the common currency.
The so-called fiscal compact is designed to force member governments to adhere to strict rules relating to finances and budgets.
For example, Ireland must reduce its budget deficit to 3pc of Gross Domestic Product (GDP) by 3pc by 2015 – the target for next year is 8.6pc.
Countries must also keep their structural deficits to 0.5p of GDP and if they break the rules could face fines after being taken to the European Court of Justice.
The plan is being promoted by French President Nicolas Sarkozy and German Chancellor Angela Merkel.
Mr Cameron walked out of talks last week when he failed to get guarantees relating to a proposed financial transaction tax which he believes will damage business in the city of London.
These rules could also have implication for the IFSC in Dublin.
According to details obtained by Reuters news agency, the draft showed that eurozone members agreed to bring forward the launch of its permanent bailout fund, the European Stability Mechanism, to July 2012.
And the maximum lending capacity of the new bailout fund, the ESM, would be set at €500m as expected.
Details of the draft document emerged just after new figures which showed the Irish economy nosedived again towards the end of the summer falling 1.9pc.
The value of gross domestic product for July-September, which includes the country's huge multinational sector, showed the first drop since the end of last year.
The domestic economy also suffered, with a 2.2pc downturn in home-grown business compared with the previous three months.
The Central Statistics Office (CSO) figures were also published as Ireland's bailout bosses in the International Monetary Fund (IMF) warned about the knock-on effect of economy woes overseas.
After reviewing the Government's budget and austerity measures to date the agency signed off on a €3.9bn tranche of loans this week.
The IMF warned that weakening activity among Ireland's trading partners would slow Irish exports and leave real GDP growth at about 1pc next year.
The CSO said there had been a 20pc fall in investment compared with the previous quarter, figures which can be heavily influenced by the purchase of valuable aircraft.
The report also said that consumer spending, construction and government spending were all continuing to fall in the third quarter.
Looking at the changes over the year, the CSO said there has been a 15pc increase in farming, forestry and fishing while construction is down 20pc.
The Department of Finance said the figures confirmed fears that the economy would contract in the second half of the year.
"The figures are very much in line with the forecasts published in Budget 2012. They show that the economy will return to growth for 2011 and that it was prudent to revise down the growth forecasts for 2012 to 1.3pc," a spokesman said.
"The economic growth in 2011 will primarily be driven by the very strong performance in the first half of the year."
The Department warned about the significant impact the eurozone crisis is having but claimed Budget 2012 has moved to encourage growth in small and medium sized enterprises, multinationals, the agri-food sector, manufacturing, financial services and tourism.
The spokesman said the end of a car scrappage scheme also played a part in diminishing consumption.
The CSO figures show the economy shrank at the fastest rate in two years.
David Begg, head of umbrella trade union body Congress, claimed that austerity was costing growth and jobs.
"Current policies are making recovery almost impossible," he said.
"No economy can sustain the sort of ongoing damage that is being inflicted on us. The latest figures show, yet again, a big drop in domestic demand while retailers warn of more closures in the new year. We need growth and we need it quickly."
Mr Begg added: "In his budget speech, the Minister for Finance indicated that he was interested in pursuing a proposal we made in relation to facilitating private pension fund investment in key projects.
"We would urge him to act speedily on this and for the Government as a whole to act on a wider range of initiatives that can inject some growth into the economy."