A government's budget is in deficit when what it gets from taxation in a given year is less than it what it is spending. Our government deficit has increased markedly since 2007.
Our general government debt went from €48bn in 2007 to an estimated €169bn by the end of 2011.
Our unemployment rate has been greater than 14pc for more than two years and our output (Gross National Product or GNP) has contracted by more than 24pc since its peak in 2007.
We've endured a series of budgets designed to rein in public expenditure and increase taxes. Now the Government has decided to ask the people for a decision on whether to adopt a set of strict budgeting rules which will limit decision making on fiscal matters.
What is the treaty?
The treaty contains a series of measures that the European and Irish authorities will monitor to ensure we comply with these proposed new budget rules. Additionally we sign up for a series of sanctions that could theoretically be used if we break these rules. We are, simply, being asked to accept or reject these provisions of the treaty.
The Maastricht Treaty contained a series of so-called 'convergence criteria' for member states that wished to join the single currency we now know as the euro. These criteria are enshrined as the Stability and Growth Pact in 1996 and were revised in the 'Six Pack' legislation signed into law in December 2011.
In simple terms, the fiscal rules were (and are) that:
• A country's budget deficit can not be more than 3pc of Gross Domestic Product (GDP).
• A country's public debt can not exceed 60pc of GDP.
• A country's budget must remain in balance over a three-year term.
If a country has a budget deficit of more than 3pc for more than three years, this is considered an excessive deficit. This means a government has to implement structural reforms (for example, cutting government expenditure, increasing taxes, reducing minimum wages, freeing up protected sectors) to reduce this deficit.
The European Commission will monitor all member states. It will measure internal imbalances in a country, such as changes in house prices, general government debt, and external imbalances, such as changes in its export market share and labour costs.
The debt brake is a provision from article 4 of the treaty which means, essentially, that once the ratio of government debt to national output rises above 60pc, we would have to move to close the gap back to 60pc.
A structural deficit arises from an imbalance in government receipts and expenditures, as opposed to a one-off or short-term emergency such as having to pay for repairs after an earthquake.
Member states may not have a structural deficit greater than 0.5pc of GDP. Importantly, for countries below the 60pc debt threshold the limit will be 1pc.
It is also important to note that we will not be subject to the debt brake rule until 2018 at the earliest.
What happens if we vote Yes?
The treaty will be signed into Irish law and the various rules and surveillance mechanisms will apply from then on.
What happens if we vote No?
Ireland does not sign the treaty into law and so doesn't have to enforce the debt brake rules. The other fiscal rules still apply. Ireland does not have access to funds from the European Stability Mechanism.
What are the main arguments in favour?
The first, and arguably most important, is the 'insurance policy' provided by the ratification of the treaty that allows us access to the funds from the European Stability Mechanism (ESM).
The treaty says that, from March 1, 2013, any future bailouts, involving the use of funds from the ESM (a €500bn rescue fund), will be granted only to those countries which have ratified and implemented the fiscal treaty. It may become necessary to use the ESM should Ireland require a second bailout.
The second argument is that Ireland's position in Europe will be weakened by rejecting the treaty. It is argued that we need to be 'on the European train'.
The third argument is that we would be perceived as more risky by international investors if we voted No, thus increasing the cost of returning to the bond markets and increasing the probability of requiring a second bailout and/or a sovereign default.
Arguments against the treaty
The first argument against the treaty is the loss of sovereignty it implies. The loss of discretion over budgets, increased macro-economic surveillance, and the balanced budget rule are seen as contributing to continued austerity.
The second argument is the creation of a two-tier Europe driven by French and German political interests above and beyond those of other member states.
The third argument is the unmeasurable nature of some of the quantities within the fiscal rules.
Stephen Kinsella is a lecturer in economics at the Kemmy Business School, University of Limerick