By Nick Mann | 19 July 2012
Ireland has published draft legislation to implement new rules requiring budgetary discipline and independent oversight of fiscal policy in all eurozone countries.
The Fiscal Responsibility Bill 2012 was laid yesterday and outlines the key provisions of Articles 3 and 4 of the European Treaty on Stability, Co-ordination and Governance, which was passed by 25 out of the 27 European Union countries in March. Ireland’s membership of the treaty, or ‘fiscal compact’, was later endorsed by voters in a referendum.
Under the legislation, the Irish government will be expected to keep its budget either in balance or in surplus. It must also introduce an ‘automatic correction mechanism’ that will be triggered if there are ‘significant deviations’ from either its budget target or the plans put in place to reach that target. Specifically, the government must lay a plan for correcting any deviation before the Irish national assembly, the Dáil, within two months.
It also requires the government to reduce its debt to gross domestic product ratio by a minimum amount each year if it exceeds a 60% threshold.
Irish finance minister Michael Noonan said: ‘The Fiscal Responsibility Bill 2012 provides for the implementation of the fiscal rules set out in the Stability Treaty. These rules are sensible and prudent and represent a responsible approach to budgeting.
‘The government is committed to commencing the passage of the Bill through the Houses of the Oireachtas when the Dáil returns in September. Following the passage of the Bill and its enactment, the government will be in a position to formally ratify the Stability Treaty.’
To fulfil the requirement of the fiscal compact for there to be an independent national institution responsible for monitoring a country’s compliance with the treaty, the Irish Fiscal Advisory Council will be made a statutory body.
The council was established on a non-statutory basis in 2011, but is now set to be given more power. In particular, it will be expected to ‘provide public assessments of whether a significant deviation has occurred, if exceptional circumstances have begun, continue to exist or have ceased and if a correction is proceeding in accordance with the correction plan’.
