The Minister for Finance, Michael Noonan TD has today published the Fiscal Responsibility Bill 2012.
This Bill sets out the legislation required to implement the key provisions of Article 3 and Article 4 of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (“the Stability Treaty”). The Bill also provides for the establishment of the Irish Fiscal Advisory Council (IFAC) on a statutory basis.
The purpose of the Bill is to provide for the implementation in national law of Articles 3 and 4 of the Treaty. The other articles of the Treaty are binding obligations under international law that do not require to be reflected in national law.
Article 3 of the Treaty requires provision in national law for the fiscal rules set out in that Article including: A commitment by governments that the budgetary position of the general government shall be balanced or in surplus. This is the general policy approach which governments must take; provision for an automatic correction mechanism that will be triggered if there are significant deviations from the budgetary target or the adjustment path towards it; and provision is made for deviation from objectives in the case of exceptional circumstances.
Article 4sets out the debt rule that is already a requirement under the revisions to the Stability and Growth Pact adopted in late 2011. Where a Member State’s General Government Debt to GDP ratio is in excess of 60 percent, the difference between the actual ratio and the 60 percent threshold must be reduced by an average of one twentieth per annum.