Micheál Martin (Cork South Central, Fianna Fail)
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Question 54: To ask the Minister for Finance the studies he has commissioned or reviewed regarding the likely impact of the fiscal control provisions in the proposed European treaty as part of his consideration of the matters before the European Council. [4755/12]

Michael Noonan (Limerick City, Fine Gael)
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First and foremost, I want to point out that the Government's priority for the public finances continues to be to meet the terms of the joint EU / IMF programme of financial assistance, which are designed to maintain the long-term sustainability of our budgetary position. Nevertheless, over the longer term, the intergovernmental Treaty on Stability, Coordination and Governance in the Economic and Monetary Union agreed on Monday by 25 Member States will require all Member States to adhere to a number of rules regarding the evolution of fiscal deficits and debt. In relation to deficits, those Member States that have signed will be required to achieve a balanced budget in structural terms. This requirement will be deemed respected if the structural balance is at its so-called country-specific Medium Term Objective. It is important to recognise that targeting an appropriate structural balance has been a feature of the European fiscal framework for a number of years already. Its application is reflected in the budgetary policies adopted by each Member State and it is in this context that any economic assessment arises.

Turning to debt requirements where the ratio to GDP in Ireland is currently above the 60 per cent threshold. The new intergovernmental Treaty, taking account of the relevant EU regulations, will therefore require us to correct this at a sufficient pace. I would point out that the pace of the required correction under the new intergovernmental Treaty 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. Specifically, we will be required to reduce our debt-to-GDP ratio annually by one-twentieth 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-to-GDP that is important. In other words, on the basis of reasonable assumptions, over the medium to longer term we can expect economic growth to do much of the "heavy lifting" on the basis of the reforms we are now putting in place. Furthermore, I think it is also worth pointing out that, irrespective of our international commitments, we need to get the debt-to-GDP ratio downwards to more manageable levels. Otherwise we will just spend more and 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.