John Gilroy (Labour)

I welcome the Minister of State to the House. I welcome the opportunity to speak today on the implications of the fiscal compact treaty. When I heard and read about it first I was concerned about the terms and, initially, I was against them. I took the view that the implementation of the terms might not be the best thing for Ireland and I readily concede that this was my view. The following are among the questions that arose in my mind. How could Ireland possibly reduce its borrowing to 60% of GDP in such a short period? Why was it necessary to achieve balanced budgets within the 3% threshold set down? How could we agree to accept sanctions for not complying with these terms? Why should we believe it is fair to codify these terms in law and, if this were the case, would a referendum not be required? Even if it was not required, would it not be desirable? Finally, was the fiscal compact not simply a recipe for continued years of unrelieved austerity?

All these questions seemed legitimate at the time until I put some thought into trying to answer them. I asked myself whether there was anything in the fiscal compact which might allay my concerns. I noted that Article 3.1 recognises that exceptional circumstances would be considered in certain cases. The challenge of closing the deficit ratio over such a short or medium term will be simply that, a challenge. I questioned whether I was against the concept of balancing budgets or in favour of moving to a position such as that held by the former Minister, Mr. McCreevy, whose ideology was summed up by his comment that when he had it, he would spend it. The consequences of that ideology are all too obvious today. I held the view that it was reasonable that there should be no sanctions for a breach of the compact until I recalled that I had come across this somewhere before, in the Growth and Stability Pact signed in 1997. It contained such targets. However, did not Germany breach the terms of that pact in 2002, 2003 and each year up to 2008? Similarly, did not ten other European countries breach the terms? What sanction was implemented at the time? None. Perhaps these automatic stabilisers might act to protect Ireland's interests as much as they might inconvenience us by having us manage our affairs properly.

Would the fiscal compact consign us to years of austerity as suggested by some commentators on the Opposition benches? Whether we accept the terms of the fiscal compact, it must be conceded that further expenditure cuts and tax increases are inevitable and unavoidable. This is unpalatable for the Government and it would be unpalatable for any government, regardless of its make-up. We cannot finance the country without borrowing from the EU or the IMF. Banks cannot sustain their balance sheets without funding from the ECB. Rejecting the treaty will not alter these facts. These are not my words but the words of the economist, Colm McCarthy. He went on to say that a rejection of the fiscal compact could make things worse. One of the articles makes access to ESM money contingent on accepting the terms of the treaty. Whether we will need access to this funding is a moot point because we hope to have returned to the markets before this becomes necessary. Regardless, is it sensible to close off a source of funding in advance, whether we chose to use it on occasion?

Let us consider Government debt from a local point of view or perhaps through the back window of Roscommon County Hospital as some have suggested we should do.