A Guide to the Stability Treaty
Posted on April 24, 2012 at 06:31 PM
What is the Stability Treaty?
The Treaty on Stability, Coordination and Governance in the Economic and monetary Union was agreed in January 2012. It will enshrine fiscal rules in Irish law to create confidence and stability in the euro.
What are the goals of the Stability Treaty?
It is intended to foster budgetary discipline (balanced budgets), strengthen coordination of economic policies, improve governance of the euro and support the achievement of the EU's objectives for sustainable growth, employment, competitiveness and social cohesion.
How many States have so far supported it?
25 EU States, including Ireland, supported the Treaty. Only the Czech Republic and UK opposed it; neither have the euro as their currency. Ireland is the only State to have a referendum.
Does the Stability Treaty control Ireland's fiscal and economic policy?
No. A Member State is free to reach balanced budgets by their own policies,provided the targets are reached. Coordination of economic policies is encouraged, but not harmonisation. Budgetary and economic programmes, including a detailed description of structural reforms, will be agreed with a Member State that is required to make corrections.
What about the Stability and Growth Pact 2011? Is this not the same thing?
The Treaty targets are effectively the same as those in the revised Stability and Growth Pact 2011. Member States must follow the Pact targets, even if the Treaty is not ratified.
There are three key differences:
- Access to funding under the European Stability Mechanism (ESM Treaty) is now linked with ratification,
- The structural deficit target is subject to enforcement,
- The targets must be incorporated into national legislation.
Who monitors progress?
On an ongoing basis the European Commission and Council will monitor a State's progress and a Member State can submit its observations on the Commission's report. The Commission may then recommend to the Council that action must be taken.
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