Michael Noonan (Limerick City, Fine Gael)
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Section 4 deals with the debt rule specified in Article 4 of the stability treaty. The requirements of the debt rule are already law under EU Regulation 1467/97, as amended under the European six-pack of reforms. However, as the debt rule is specifically included in the stability treaty, we are providing for its implementation in domestic law through this Bill. The text accomplishes this by direct reference to the relevant EU regulation. This eliminates the possibility of drafting a provision that could be inconsistent, and ensures better adherence to the regulation. The EU regulation states that debt in excess of the 60% debt-to-GDP ratio must be reduced by at least one-twentieth per year based on changes over the last three years. It goes on to provide for a transition period for member states, including Ireland, that were subject to an excessive deficit procedure on 8 November 2011. This transition period means that the general rule will only apply three years after the correction of the existing excessive deficit. Our existing excessive deficit will be corrected in 2015 when our general Government deficit is targeted to be just under 3% of GDP. This means that the one-twentieth rule will apply in 2019, not 2018. In the meantime, it is required that there be satisfactory progress in reducing the debt-to-GDP ratio and this will be assessed by the Commission and ECOFIN.

As to the Department's estimates of the future growth rates, it is difficult enough to forecast growth rates for a short period ahead.

There is quite a variation among the forecasts, even for the remainder of this year. The IMF forecast is 0.5% or 0.6% and our budgetary forecast is 0.7%, whereas the ESRI, which is a very reputable organisation, is forecasting 1.8% this year. That seems to be the outlier. When one projects out to 2019, it becomes difficult. The Central Bank and the fiscal council has conducted an analysis which suggests that complying with the budgetary rule will also ensure that we comply with the debt rule. In other words, they expect sufficient growth within the system to avoid the need for direct action as we approach 2019. These statements are tenuous, however, and if one examines the current position one will see a number of moving parts over a much shorter period than between autumn 2012 and spring 2019, which is a long stretch of time in the context of our current crisis.