Ireland

IX - Fiscal Compact

The Fiscal Compact (Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) was signed on March 2, 2012. Negotiations on this Treaty began between 26 member states of the EU (all but the UK) after the 8/9 December 2011 European Council. 25 contracting parties eventually decided to sign the Treaty (not the Czech Republic).        
After ratification by the twelfth Eurozone member state (Finland) in December 2012, the Fiscal Compact entered into force on 1 January 2013. For several contracting parties the ratification is still on-going.   
(
http://www.european-council.europa.eu/eurozone-governance/treaty-on-stability?lang=it)

Negotiation
IX.1
What political/legal difficulties
did Ireland encounter in the negotiation of the Fiscal Compact, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

In Parliamentary debates it was stated that a key concern for Ireland was that the TSGC mirror Union law as closely as possible.[1] Ireland sought, and obtained, a provision that the parameters of the existing EU/IMF programme would not be affected by the TSGC.[2] Finally while the Irish government did not seek the insertion of recital 5, making ratification and implementation of the TSGC a condition for accessing the ESM it did view it as a reasonable provision.[3]

Ratification
IX.2
How has the Fiscal Compact been ratified in Ireland and on what legal basis/argumentation?

The Fiscal Compact has been ratified by a combination of constitutional amendment and legislation. 

In April of 2012 following advice from the Attorney General Máire Whelan the government decided to hold a referendum on the ‘Treaty on Stability, Coordination and Governance in the Economic and Monetary Union’ (Fiscal Compact).[4]

Amendment of the Irish constitution is only possible by popular referendum initiated as a Bill in the Dáil and passed by both houses of Parliament in accordance with Article 46 and 47 Bunracht na hÉireann (the Irish Constitution). Upon approval by a majority of electors the Bill is to be signed by the President and the constitution is deemed to be amended. Thus, while amendment is only possible with approval of the people, any such amendment must be passed by a majority in the Dáil, which in effect means with Government support.

According to statements of the Taoiseach in the Dáil the opinion of the Attorney General was based on the fact that the Fiscal Compact Treaty did not form part of the framework of the European Treaties and hence required a referendum. Presumably this comment referred to the fact that the Fiscal Treaty could not be considered a measure necessitated by EU membership within the meaning of Article 29 of the Irish Constitution and therefore did not enjoy automatic compatibility with the constitution. The opinion of the Attorney General is not made public. On 31 May 2012 the referendum was passed by a majority of 60% of the votes cast.[5]

The Thirtieth Amendment of the Constitution (Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) Act 2012 was enacted on 27 July 2012 and inserted the new section 10 into Article 29 of the Irish constitution:

10 The State may ratify the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union done at Brussels on the 2nd day of March 2012. No provision of this Constitution invalidates laws enacted, acts done or measures adopted by the State that are necessitated by the obligations of the State under that Treaty or prevents laws enacted, acts done or measures adopted by bodies competent under that Treaty from having the force of law in the State’

Ratification difficulties 
IX.3
What political/legal difficulties
did Ireland encounter during the ratification of the Fiscal Compact?

The Fiscal Compact was implemented by a constitutional amendment requiring a popular referendum and an act of parliament. The Act initiating the referendum was debated in the Oireachtas (Parliament) prior to the referendum.

Oireachtas Debates

In parliament the Government parties (Fine Gael and Labour) and the largest opposition party (Fianna Fáil) supported the Treaty while Sinn Féin, the United Left Alliance (ULA) and a number of independent politicians opposed it.

Those in favour of the Treaty presented two main arguments; that it would facilitate budgetary discipline and that it would allow access to ESM funding. The latter was said to be important for generating confidence in the Irish position on the international bond markets thereby helping in a successful exit from the programme of financial assistance and secondly, in the event that market funding was not possible, an alternative source of financing the state.[6]  Some politicians noted that the Treaty would put an end to ‘auction politics’ whereby politicians sought to essentially buy the votes of electors through expansive budgetary policies and electoral promises.[7] A further argument that was frequently raised related to the likely impact of ratification on the investment policies of multinational corporations.[8]

Those opposed to the Treaty in Parliament based their arguments on two principal grounds; a general opposition to a policy of austerity (that they saw as being ‘locked in’ by the TSGC) and anti-democratic elements of the TSGC.[9] The latter argument was best expressed by Clare Daly of the ULA who described the TSCG as ‘a fundamental attack on the basic democratic right to elect a Government and have that Government decide on budgetary and economic strategy.’[10] In particular she pointed to the balanced budget rule, ‘which effectively ties the hands of future Governments to the same economic policies as this one. In principle we are being wedded to neoliberalism and austerity’ and Article 5 of the TSGC, described by Deputy Daly as a ‘mechanism for countries to be effectively placed into administration.’[11] In response the Minister for Foreign Affairs and Trade, Eamon Gilmore pointed to Articles 12 and 13 of the TSGC providing for involvement of the European Parliament and national parliaments.[12] These provisions were however described by Richard Boyd Barrett TD, a colleague of Deputy Daly in the ULA, as ‘a democratic fig leaf.’[13]

When discussing the text of the provision to be inserted into the constitution to allow for ratification of the TSGC one Member of Parliament sought to remove the so-called ‘necessitated’ clause, providing that:

No provision of this Constitution invalidates laws enacted, acts done or measures adopted by the State that are necessitated by the obligations of the State under that Treaty or prevents laws enacted, acts done or measures adopted by bodies competent under that Treaty from having the force of law in the State.’

Such a clause is commonly used to provide for constitutional immunity for Union based legislation.[14] Catherine Murphy argued that the TSGC was an ordinary international agreement that did not warrant such constitutional immunity. Deputy Body Barrett appeared to fear that that provision would protect any measures adopted on foot of advice from the European Commission in the context of the TSGC from constitutional challenge.[15] While this provision was not elaborated upon at length by the government, bar statements that it was on foot of advice of the Attorney General, Minister of State at the Department of Foreign Affairs and Trade, Joe Costello TD did suggest that it would cover the Fiscal Responsibility Bill (now the Fiscal Responsibility Act 2012 see section II. 4 above).[16]

Referendum Campaign

While opponents of the TSCG did seek to raise questions of democratic accountability the main focus of the referendum campaign was on the funding question and in particular whether Ireland would have access to the ESM in the absence of ratification. The ‘No’ side provided no satisfactory answer to this question. Sinn Féin disputed the premise of the question and asserted that in practice, in the self-interest of ESM members, Ireland would in fact be given access to the fund. The United Left Alliance argued that funds could be raised from internal taxation by targeting corporations, wealthy individuals and high earners. Despite some fluctuations in polling data support for the Treaty remained relatively high at 60%.[17] Concerns regarding the potential social implications of the Treaty, in particular by locking austerity in as a general economic policy, were also raised by commentators during the campaign.[18] In May the referendum was passed by a majority of 60.3% to 39.7% of the votes cast.

Balanced Budget Rule     
IX.4
Article 3(2) Fiscal Compact prescribes that the Balanced Budget Rules shall take effect in national law through “provisions of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes.” How is the Balanced Budget Rule (intended to be) implemented in Ireland? Will there be an amendment of the constitution? If not, describe the relation between the law implementing the Balanced Budget Rule and the constitution. If the constitution already contained a Balanced Budget Rule, describe the possible changes made/required, if any.

It is important to note that the 30th amendment to the constitution that resulted in the new Article 29.10 of the Irish constitution firstly allows the state to ratify the TSGC and secondly provides any piece of legislation necessitated by that Treaty with immunity from constitutional challenge (‘the necessitated clause’).[19] It does not incorporate either the TSGC or the balanced budget rule into the Irish constitution.

Rather the balanced budget rule contained in Article 3(2) TSGC is implemented in Ireland through the Fiscal Responsibility Act 2012 and in particular its sections 3 and 4.[20] It is an ordinary piece of legislation and can be repealed or amended by the Oireachtas (Parliament) at any time according to the ordinary legislative process. However, it will enjoy immunity from constitutional challenge per the second clause of Article 29.10 of the constitution.[21] There is no provision in the Irish constitution for quasi-constitutional legislative measures. One attempt has been made to give a specific piece of legislation a constitutional status through the adoption of a constitutional amendment to that effect. While the technique itself was ruled compatible with the constitution[22] the associated constitutional amendment was rejected at referendum.

Debate Balanced Budget Rule       
IX.5
Describe the national debate on the implementation of the Fiscal Compact/Balanced Budget Rule, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law and the budgetary process.

The provisions of the fiscal compact, including the balanced budget rule were implemented in Ireland by the Fiscal Responsibility Act 2012. This also served to implement Directive 2011/85/EU and the relevant debate is covered in the answer to question VII.2 above. As mentioned above comments by Minister of State at the Department of Foreign Affairs and Trade, Joe Costello TD before the Seanad (upper house) suggested that at least in the view of the government that act would be protected from constitutional challenge by virtue of the second clause of Article 29.10of the constitution (see answer to question IX.3 above).

Relationship BBR and MTO   
IX.6
What positions, if any, are taken in the national debate about the relationship between the Balanced Budget Rule of article 3(1)(b) Fiscal Compact and the Medium-term Budgetary Objective (MTO) rule in the Six-Pack (section 1A, article 2a Regulation 1466/97, on which see above question vii.10)?

There has been no public debate about the relationship between the balanced budget rule of the Fiscal Compact and the Medium term budgetary objective in the six-pack.

Case law         
IX.7
Is there a (constitutional) court judgment on the Fiscal Compact/implementation of the Balanced Budget Rule?

Yes, see question V.4.

Non-Eurozone and binding force 
IX.8
Has Ireland decided to be bound by parts of the Fiscal Compact on the basis of article 14(5) Fiscal Compact already before joining the Euro area, or has this option been debated?

Not applicable.

Miscellaneous
IX.9
What other information is relevant with regard to Ireland and the Fiscal Compact?

No other relevant information.

[1]               Minister for Foreign Affairs and Trade Eamonn Gilmore, Dáil Debates, 20 April 2012, Vol 762 No 2, 247.

[2]               Minister for State at the Department of Foreign Affairs and Trade Joe Costello, Seanad Debates, 23 April 2012, Vol 214 No 14, 884.

[3]               Some opponents of this treaty try to argue that linking the ESM to the treaty is some form of blackmail. This is fundamentally disingenuous in my view. Let me be very clear about this. Ireland did not seek this link in the negotiations but, if I am asked if its unreasonable, I say that it is not. It is logical that those who are prepared to offer financial support in time of difficulty should be assured that those receiving it are prepared to run sound and sensible policies. ‘ Minister for State at the Department of Health Róisín Shorthall, ibid, 913.

[4]               ‘Referendum to be held on Fiscal Treaty’ (RTE News, 2 March 2012)  <http://www.rte.ie/news/2012/0228/referendum.html> accessed 21 October 2012.

[5]               ‘Ireland passes fiscal treaty referendum by 60.3% to 39.7%’ (RTE News, 26 July 2012)  <http://www.rte.ie/news/2012/0601/fiscal-treaty-referendum-count-to-begin.html> accessed 1 November 2012.

[6]               See comments of Minister for Foreign Affairs and Trade, Dáil Debates, 18 April 2012, Vol 761 No 3, 470 ff.

[7]               See Mary Mitchell O’Connor, Dáil Debates, 19 April 2012, Vol 762 No 1, 101.

[8]               Mr. O’Neill the managing director of IBM Ireland, speaking on behalf of the US multinationals in Ireland said a “Yes” vote will promote stability, investment and growth in the economy. By voting “Yes” we will maintain our position as an attractive location for investment, continue to put in place the necessary economic and budgetary reforms and preserve our strategically important place in Europe’, Senator Mary White, Seanad Debates, 23 April 2012, Vol 214 No 14, 886. Similarly see the contribution of Dan Neville TD, ‘This is a treaty on stability and is about ensuring a stable currency for Ireland; ensuring a stable euro. It is about confidence abroad and maintaining and enhancing the influence which we have built up with many investors. We have seen progress in that area in recent weeks and month in international companies looking to invest in the country…’, Dáil Debates, 19 April 2012, Vol 762 No 1, 107.  

[9]               See in particular the contribution of the Sinn Féin spokesperson Padraig Mac Lochlain TD, Dáil Debates, 19 April 2012, Vol 762 No 1, 101 ff.

[10]             ibid, 109.

[11]             ibid, 109-110.

[12]             Dáil Debates, 20 April 2012, Vol 762 No 2, 250.

[13]             ibid, 251.

[14]             See Article 29.4 Bunreacht na hÉireann (the Irish Constitution).

[15]             Dáil Debates, 20 April 2012, Vol 762 No 2, 252.

[16]             The second sentence of the amendment is intended simply to facilitate the introduction of legislation in accordance with the treaty, namely the laws we will design such as the fiscal responsibility Bill.’ Minister of State, Joe Costello TD, Seanad Debates, 24 April 2012, Vol 214 No 15, 960.

[17]             See ‘How the Yes was Won’ Sunday Business Post (Dublin, 3 June 2012).  Thus ‘[i]n the long contest between fear and anger, fear was the winner. Fear of the consequences of a No vote won the day for the Yes campaign – fear for the future of the euro, fear about voters’ own circumstances and fear – above all – that the country would be cut off from future funding proved decisive in the end.’ ‘When fear outgunned anger’ Sunday Business Post (Dublin, 3 June 2012). 

[18]             See Vincent Browne, ‘Fiscal Treaty will increase gap between rich and poor’ Irish Times (Dublin, 4 April 2012) 14 and Patrick Kinsella, ‘Treaty is a social, political and economic threat’ Irish Times (Dublin, 24 May 2012) 14.

[19]             For a discussion on the interpretation of the analogous clause contained in Article 29.4.6° relating to EU treaties see Gavin Barrett, ‘The Evolving door to Europe: Reflections on an eventful forty years for Article 29.4 of the Irish Constitution’ (2012) 48 Irish Jurist 132

[20]             For a detailed discussion on the parliamentary debates of the Fiscal Responsibility Act 2012 see the answer to question IX.3 above.

[21]             See comments by Minister of State at the Department of Foreign Affairs and Trade, Joe Costello TD, Seanad Debates, 24 April 2012, Vol 214 No 15, 960.

[22]             Morris v Minister for the Environment and Local Government [2002] 1 IR 326. See also Hogan and Whyte, JM Kelly: The Irish Constitution (n 43) paras 8.1.11 – 8.1.13.