Jim Walsh (Fianna Fail)

As others have said, my party has decided to support the fiscal stability mechanism treaty and we are doing so in order that we can continue to access the European Stability Mechanism. However, my view differs from that of the Minister of State. I do not believe there is much of a chance of Ireland being able to go back to the markets at the end of the current programme period. The Government will have to repeat the exercise and go back to the European Stability Mechanism. For that reason, it is important that we position ourselves in order we can do this.

I support the treaty for another reason which has not been mentioned in the House, although it was what initially prompted me. I support the idea that we must balance our budget and, therefore, avoid the situation here in the 1980s under the parties in government and also under Governments in which my party was involved, where the necessary steps to correct the budget deficit were not take because it was politically unpopular to do so. In our case, it was a question of priming public expenditure in the run-up to general elections in order to maximise support. That was wrong. I have spoken before about the Swiss model. I was taken with the fact they had a debt brake system in place and that they had to have a balanced budget. For that reason, I support the treaty.

It is welcome that there are penalties included in the treaty and that the European Court of Justice will be the adjudicator. In fact, penalties up to 0.1% of GDP can be applied to countries which fail to meet their requirements. That will certainly put strictures on us. We are conceding sovereignty - we did this the first day we joined the EEC, as it was called in 1973.

The question of not exceeding 0.5% of nominal GDP needs explanation. What is meant by "structural deficit"? To the best of my knowledge, this term has not been defined in the treaty, nor has it been defined by the participating parties to the agreement. I ask specifically , for example, whether it will include or exclude capital expenditure. What will be included? That is a pertinent question. If it has not been answered, it will need to be in the lead-up to the referendum.

My second point concerns the 60% debt-to-GDP ratio that must be met. There are serious questions to be asked in this regard and I am surprised the matter was not mentioned by the Minister of State. Our ballpark deficit figure will end up somewhere in the region of 120% of GDP. While some economic commentators suggest it will be considerably in excess of this figure, let us take it as being conservative. That means we will exceed the 60% requirement by 60% and that 60% must be corrected over 20 years. I realise there will be some amelioration for countries such as ours which are in the current programmes. However, presumably at the end of the current programmes we will be left with a very high overhang or deficit which must be corrected over 20 years. If that is in the order of the 60% as I am suggesting, it means there will have to be a correction of 3% per year which at current levels of GDP amounts to €4.8 billion. How will that be managed given the magnitude and especially when one considers the last budget under which the correction was less than that? Apart from not being good economically, I thought it was politically insane but the Government went for soft options. It increased the VAT rate by 2% and it increased the cut in capital expenditure by €750 million. They will not be options in future.