Michael Noonan (Limerick City, Fine Gael)

The Government's overriding fiscal objectives are twofold: first, we must return to a situation in which we are living within our means; and, second, we must put the debt-GDP ratio on a firm downward path. The strategy to achieve these objectives is set out in the Government's medium-term fiscal statement as well as in the documentation accompanying budget 2012. These documents spell out the necessary consolidation to correct our excessive deficit by 2015 - in other words to reduce the general Government deficit to below 3% of GDP by that stage. On the basis of these measures, it is envisaged that the debt-GDP ratio will peak in 2013, and will decline thereafter.

This multiannual approach balances the need to support the emerging economic recovery with the need to pursue further consolidation. Crucially, this strategy has been agreed with the troika. The intergovernmental treaty on stability, co-ordination and governance in the economic and monetary union agreed on Monday does not change the strategy as implementing the programme commitments remains the priority.

Nevertheless, over the medium term, member countries are required to achieve a balanced budget in structural terms, in other words after adjustment for the impact of the economic cycle on the budgetary position. The timeframe for convergence towards the structural deficit target set in the intergovernmental treaty and our associated country-specific medium-term objective, MTO, is yet to be determined. At this point in time, it would be speculative to put forward a possible timeline for reaching the structural deficit of 0.5% of GDP and in any event it is currently the priority for Government to bring our actual deficit below 3% of GDP by the end of 2015. My officials will continue to work with the Commission on all aspects, including measurement of the structural fiscal position.

The debt correction requirement in the new treaty, which will apply to Ireland as our general Government debt-GDP ratio is above 60% of GDP, is the same as is already required under the reforms of the Stability and Growth Pact as part of the so-called "six pack" of legislative reforms.

Additional information not given on the floor of the House.

Specifically, we will be required to reduce our debt-GDP ratio annually by at least one 20th of the difference between the actual rate and the threshold rate. I would point out that a transition period will apply for all countries that are currently subject to the excessive deficit procedure on the basis of the deficit criterion, including Ireland.

In terms of the fiscal implications of this debt correction rule, it is important to remember that it is the ratio of debt-GDP that is important. In other words, on the basis of reasonable assumptions over the medium term, we can expect economic growth to do much of the heavy lifting. Furthermore, I think its also worth pointing out that, irrespective of our international commitments, we need to get the debt-GDP ratio down to more manageable levels because otherwise we will just spend more of our tax revenue on servicing the debt burden, which reduces the amount we can spend on education, health, social welfare and other areas.

It is also appropriate for me to highlight developments in recent times in our bond spreads and the NTMA's recent success in switching approximately €3.5 billion worth of bonds due to mature in 2014 with bonds maturing in 2015 at a broadly similar annual interest rate. This will smooth the maturity profile of Irish debt, and is a reflection of the improved market sentiment for Irish Government paper.

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