Oireachtas Joint and Select Committees
Wednesday, 21 January 2015
Joint Oireachtas Committee on Finance, Public Expenditure and Reform
Annual Growth Survey 2015, Alert Mechanism Report 2015 and An Investment Plan for Europe: Discussion
Mr. John McCarthy:
The answer to the first part of the Deputy's question is that the rule is very much binding, as are the overall rules of the preventive arm. We must be approaching the medium-term budgetary objective based on either a change in structural balance or an assessment of the benchmark. Finally, an overall assessment is undertaken, and we must be approaching the medium-term budgetary objective at a sufficient pace. That is binding.
The reforms of the pact in 2011 introduced what is called the sanctions regulation, which provides for sanctions in the preventive arm of the pact. They never existed previously. They were only ever in the corrective arm of the pact. In terms of what that means, the rules are very much binding.
With regard to the draft budgetary plans of euro area member states that were assessed last November and December, the Commission kicked to touch on a number of countries, including Italy. Italy has to revert to it in March because it is breaching the requirements of the preventive arm. Italy has to sort it out and come back to the Commission. Otherwise, potentially there are sanctions coming down the line.
I stress that financial sanctions can only apply in an ex-postmanner. In other words, a country cannot be sanctioned on the basis of projections. It is only on the basis of outturn data. However, there is a regulation that has introduced financial sanctions and those sanctions are quasi-automatic, in other words, one is guilty unless one is proven innocent. The Commission will adopt a decision to impose sanctions and that cannot be overturned unless a reverse qualified majority of member states overturn it.