Ireland

VII - Six-Pack

The ‘Six-Pack’ is a package of six legislative measures (five regulations and one directive) improving the Economic governance in the EU. The Commission made the original proposals in September 2010. After negotiations between the Council and the European Parliament, the package was adopted in November 2011 and entered into force on December 13, 2011. Part of the ‘Six-Pack’ measures applies only to the Eurozone member states (see the individual titles below).   
The ‘Six-Pack’ measures reinforce the Stability and Growth Pact (SGP), among others by introducing a new Macroeconomic Imbalances Procedure, new sanctions (for Eurozone member states) and reversed qualified majority voting. Also, there is more attention for the debt-criterion.     
(
http://ec.europa.eu/economy_finance/economic_governance/index_en.htm)

Negotiation
VII.1
What positions did Ireland adopt in the negotiation of the ‘Six-Pack’, in particular in relation to the implications of the ‘Six-Pack’ for (budgetary) sovereignty, constitutional law
, socio-economic fundamental rights, and the budgetary process?

The Government, speaking after the European Council Summit of November 2011, described itself as in favour of greater economic and budgetary coordination within the Eurozone. It accepted that states within a monetary union would have to accept their interdependence and that surveillance of each other’s economic and budgetary policies was necessary and legitimate.[1] The six-pack was welcomed as addressing the ‘root causes’ of the crisis rather than simply reacting to events. However, while broadly in favour of further reform efforts, ministers were in favour of reforms that could be achieved within the existing Treaty framework and would only be in favour of Treaty changes if necessary.[2] Finally in the negotiations Ireland was in favour of ‘institutional balance’ and in particular for maintaining a role for the European Commission rather than taking an intergovernmental route.[3]

Much of the debate concerned Ireland’s banking debt and the broader Eurozone crisis including the second bailout for Greece. One Senator from the main opposition party did note that the six-pack consisted of more intrusive detailed policy constraints thereby potentially involving a more significant loss of sovereignty than even under the EU/IMF Programme of Financial Assistance.[4] In her reply the Minister for State spoke of the broader developments in the Eurozone and acknowledged the need to balance the need for action and leadership by larger Member States such as France and Germany while avoiding domination.[5] At the same time, when speaking the Minister acknowledged the need for ‘a solution to the urgent and serious crisis we face’ that that the issue of institutional design and democratic governance of the Euro was ‘a discussion for another day.’[6]

Directive 2011/85/EU
Council Directive 2011/85/EU of 8 November 2011 on requirements for budgetary frameworks of the Member States

Implementation 
VII.2
What measures are being taken to implement Directive 2011/85/EU on requirements for budgetary frameworks (required before 31 December 2013, article 15 Directive 2011/85/EU)?

Irish law currently (July 2013) meets some of the requirements of Directive 2011/85/EU (the Directive) and accordingly no legislative change is envisaged in those areas. That is the case for provisions relating to the production and publication of financial statistics and auditing arrangements. Government is considering publishing Local Authority (the principal form of Local Government) financial information that is already transmitted on a quarterly basis to the European Commission as part of the financial assistance programme. 

Financial forecasting is currently undertaken by the Department of Finance. This may change with the adoption of the Two Pack (see below) with the Irish Fiscal Advisory Council (IFAC) assuming this role. The IFAC, established in June 2011 and placed on a statutory basis under the Fiscal Responsibility Act 2012, conducts an ex-post assessment of the Department’s forecasts.

Fiscal rules have been implemented via the Fiscal Responsibility Act 2012, which contains two fiscal rules:[7]

§  A budgetary rule requires the Government to either maintain its budgetary position in balance or surplus (the ‘budget condition’)[8] or to ensure that the annual structural general government balance is converging towards the medium term budgetary framework as set out in accordance with the Regulation 1467/97/EC as amended (Excessive Deficit Regulation) (the ‘adjustment condition’).[9]

§  A debt rule applies when the government debt to GDP ration exceeds 60% and requires that the ratio be reduced in accordance with the Excessive Deficit Regulation.[10]

Finally, provisions for medium term budgetary framework are contained in the Ministers and Secretaries (Amendment) Act 2013.[11] The Bill was presented before the Dáil on 26 September 2012, was debated by the Dáil in June of 2013 and by the Seanad in July of 2013. It received the signature of the President on the 23 July 2013. It amends s 17 of the Ministers and Secretaries (Amendment) Act 2011. Under the new s 17 the Government, upon a proposal of the Minister for Finance, shall make an annual decision fixing the upper limit of government expenditure for the subsequent three years, broken down per year. At the same time annual expenditure ceilings will be provided for individual departments.

Implementation difficulties   
VII.3
What political/legal difficulties
did Ireland encounter in the implementation process, in particular in relation to implications of the directive for (budgetary) sovereignty, constitutional law and the budgetary process?

The only significant piece of legislation to have been adopted in the implementation of the Directive was the Fiscal Responsibility Act 2012 (the 2012 Act). Furthermore, that Act was seen as implementing the Fiscal Compact and no reference was made to Directive 2011/85/EU. At the same time the Department of Finance intends to implement Directive 2011/85/EU by a combination of the Fiscal Responsibility Act 2012 and statutory instruments (a form of secondary legislation by Ministers). Debate in Parliament focused on the fiscal rules and the placing of the Irish Fiscal Advisory Council on a statutory footing.

The Bill was presented before the Dáil on the 16 July 2012 and debated between the 9 and 11 of October of 2012. The Seanad discussed the Bill on the 14 November 2012. It was signed by the President on the 27 November 2011. The government and the main opposition party were in favour of the rules. A number of parliamentarians made reference to the fact that the Act was merely implementing the referendum on the Fiscal Compact and hence people’s directly expressed will (see question IX.2).[12] The measures were seen as restoring credibility to the management of Irish budgetary policy and would facilitate a return to the financial markets at the end of the programme of financial assistance.[13] In contrast to Sinn Féin accusations that the Act would see a diminution of economic sovereignty (see below) some contributors to the debate were of the opinion that Ireland’s economic sovereignty had already been ‘ripped from our hands when the troika arrived into town on a bleak October morning.’[14] The implementation of these rules, by avoiding a reoccurrence of that incident, would in fact promote Ireland’s economic sovereignty in the future. Similarly Michael McGrath (spokesperson for the main opposition party, Fianna Fáil) highlighted the fact that while future governments would be obliged to keep spending within certain limits the policy choices, including levels of expenditure and taxation, spending within those limits would remain a national prerogative.[15]

The Bill was opposed by Sinn Féin and a number of smaller parties and independent members. Sinn Féin argued that the rules would not have prevented Ireland’s financial crisis (Ireland would have easily complied with the rules until 2007), that it would prolong austerity policies currently imposed under the programme of financial assistance and that finally it would exchange the tutelage of the Troika for that of the European institutions, particularly in the event that Ireland breached obligations under the Stability and Growth Pact.[16]

Macroeconomic and budgetary forecasts       
VII.4
What institution will be responsible for producing macroeconomic and budgetary forecasts (article 4(5) Directive 2011/85/EU)? What institution will conduct an unbiased and comprehensive evaluation of these forecasts (article 4(6) Directive 2011/85/EU)?

The Department of Finance currently conducts detailed economic forecasting. It will continue to fulfil this role although there are indications this may change with the adoption of the Two Pack (section forthcoming). The Irish Fiscal Advisory Council will then conduct evaluations of these forecasts.[17]

Fiscal Council  
VII.5
Does Ireland have in place an independent Fiscal Council (article 6(1) Directive 2011/85/EU: ‘independent bodies or bodies endowed with functional autonomy vis-à-vis the fiscal authorities of the Member States’)? What are its main characteristics? Does Ireland have to create (or adapt) a Fiscal Council in order to implement Directive 2011/85/EU?

The Irish Fiscal Advisory Council was established in June of 2011. It was placed on a statutory footing by the Fiscal Responsibility Act 2012.[18] It was established as part of a reform of Irish budgetary procedures under the EU-IMF programme of financial assistance.

It is composed of 5 members of national or international standing for terms of 4 years. Its independence is assured by a fixed budget of €800,000 provided for by statute and index linked to inflation. Independence is also guaranteed by security of tenure. Removal shall be for stated reasons of incapacity or stated misbehaviour and shall only take place upon a resolution of the Dáil (lower house of parliament).

Its main functions are to conduct and publish periodic reviews of government economic forecasts, Government budgetary policies and of Government compliance with the fiscal rules contained in the Fiscal Responsibility Act 2012.

Regulation No 1176/2011 on the prevention and correction of macroeconomic imbalances   
(
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32011R1176:EN:NOT)

MEIP difficulties      
VII.6
What political/legal difficulties
did Ireland encounter and what debates have arisen, in particular about implications of the regulation for (budgetary) sovereignty, constitutional law, socio-economic fundamental rights, and the budgetary process?

No legal or political difficulties have arisen, nor have debates taken place on the implications of the regulation for sovereignty, constitutional law and the budgetary process outside the broader debates on Euro governance.

Ireland as a programme country was subject to a separate surveillance procedure and was not covered by the alert mechanism for 2012 or 2013.[19]

Regulation No 1175/2011 on strengthening budgetary surveillance positions      
(
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CONSLEG:1997R1466:20111213:EN:PDF)

MTO procedure 
VII.7
What changes to the rules on the budgetary process are made to accommodate the amended Medium-term Budgetary Objective (MTO) Procedure?

The MTO is now included in the Stability Programme Update laid before the Dáil annually in April.

European semester  
VII.8
What changes have to be made to the rules and practices on the national budgetary timeline to implement the new rules on a European Semester for economic policy coordination (section 1-A, article 2-a consolidated Regulation 1466/97)?

The Stability Programme Update (SPU) was published on the same day as the general budget towards the end of December of the year preceding the reference year of the budget (ie Budget 2011 would be announced by the Minister for Finance before the Dáil in December 2010). The SPU is now laid before the Dáil in April and discussed with the Minister for Finance by the Joint Committee on Finance, Public Expenditure and Reform.[20]

MTO difficulties          
VII.9
What political/legal difficulties
did Ireland encounter and what debates have arisen, in particular about implications of the regulation for (budgetary) sovereignty, constitutional law and the budgetary process?

No political or legal difficulties were encountered nor were there debates specific to Regulation 1175/2011/EU outside the general debate on the six pack (see answer to question VII.1 above).

Respect MTO     
VII.10
How is respect of the Medium-term Budgetary Objective included in the national budgetary framework (section 1A, article 2a consolidated Regulation 1466/97)?

The Medium Term Budgetary Objective (MTBO) has been incorporated within the ‘budgetary rule’ contained in s 3 of the Fiscal Responsibility Act 2012 requiring that the annual structural balance of the general government be at the MTBO or converging towards the MTBO in accordance with Regulation 1466/97/EC.[21] The MTBO is defined in s 5 of the Fiscal Responsibility Act 2012.

Current MTO    
VII.11
What is Ireland’s current Medium-term Budgetary Objective (section 1A, article 2a consolidated Regulation 1466/97)? When will it be revised?

Upon exit from the programme of financial assistance Ireland’s MTBO will be a balanced budget in structural terms from 2016 onwards.[22] There is no indication of when it will be revised.

Adoption MTO   
VII.12
By what institution and through what procedure is Ireland’s Medium-term Budgetary Objective adopted and incorporated in the stability programme (Eurozone, article 3(2)(a) consolidated Regulation 1466/97)?

Ireland’s MTBO is defined in section 5 of the Fiscal Responsibility Act and incorporated into the Stability Programme by the Department of Finance. Limits on government spending will be adopted by the Government upon a proposal of the Minister for Finance.[23]

Regulation No 1177/2011 on the excessive deficit procedure
(
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CONSLEG:1997R1467:20111213:EN:PDF)

EDP difficulties 
VII.13
What political/legal difficulties
did Ireland encounter and what debates have arisen, in particular about implications of the regulation for (budgetary) sovereignty, constitutional law and the budgetary process?

No legal or political difficulties were encountered nor did any significant debates specific to Regulation 1177/2011/EU arise outside the general debate on the six pack (see answer to question VII.1). There are no known specific changes to the budgetary procedure to accommodate the amended excessive deficit procedure.
Regulation No 1173/2011 on effective enforcement of budgetary surveillance      

(
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32011R1173:EN:NOT)
Sanctions
VII.14
What political/legal difficulties
did Ireland encounter and what debates have arisen, in particular about implications of the regulation for (budgetary) sovereignty, constitutional law and the budgetary process?

No legal or political difficulties were encountered nor did any significant debates specific to Regulation 1173/2011/EU arise outside the general debate on the six pack (see answer to question VII.1).

General changes      
VII.15
What further changes have to be made to the rules on the budgetary process in order to comply with the Six-Pack rules?

There were no known changes to the rules on budgetary process to accommodate the possibility of sanctions for non-compliance with the MTBO.

Miscellaneous
VII.16
What other information is relevant with regard to Ireland and the Six-Pack?

No other relevant information


[1]               See comments of An Taoiseach (Prime Minister) Enda Kenny, Dáil Debates, 2 November 2011, Vol 745 No 2, 221. (‘As we have seen time and again over the past three years, what happens in one European country, particularly within the euro area, has the potential to spill over on to others’.)

[2]               Minister for Finance, Michael Noonan, ibid, 279. (‘Ireland is firmly in favour of improved, balanced governance that offers correct safeguards. We believe this is in all our interests. The urgency of the current situation demands prioritization of value-added measures that will be implemented quickly and preferably within the existing treaty.’).  See also comments by Minister for State at the Department of Foreign Affairs and Trade (with responsibility for European Affairs), Lucinda Creighton, Seanad Debates, 8 November 2011, Vol 211 No 4. , 321. No doubt this stance is attributable to the fact that in practice any general renegotiation of the Treaties requires a constitutional amendment and hence referendum in Ireland, something that can prove a challenge at times for Government and indeed the political establishment as the original failures of both the Nice and Lisbon referenda illustrate.

[3]               Minister for State Lucinda Creighton, Seanad Debates, 8 November 2011, Vol 211 No 4.

[4]               Senator Thomas Byrne, ibid, 228. (‘It may be necessary in the context of receiving aid from other countries but in terms of the normal run of countries we are ceding even more sovereignty to the European Commission because currently under the EU-IMF arrangement, we have broad capacity to decide what will be in our budget as long as we reach the targets set out in terms of annual deficits.’)

[5]               We clearly have a political crisis. I have spoken about it many times since my appointment as Minister of State with responsibility for European affairs. On the one hand some Members have talked about the unedifying intervention or interference in the democratic processes in sovereign member states, but on the other hand we want to see political leadership at European level…There is a double standard of which we are perhaps all guilty. It is clear that the engine of the European project has always been a Franco-German one. That is what rose from the ashes of the Second World War. We need that engine to maintain the political momentum and underpin the European project. That is in all of our interests. There is a fine line between that momentum becoming some sort of domination. We must be clear about that. That is where the institutional balance is so important.’ Minister for State Lucinda Creighton, ibid, 232.

[6] Ibid, 233.

[7]               The Fiscal Responsibility Act was described as implementing the requirements of the Fiscal Compact. However its provisions equally implement Directive 2011/85/EU.

[8]               Fiscal Responsability Act 2012, s 3(2).

[9]               ibid, s 3(3).

[10]             ibid, s 4.

[11]             Ministers and Secretaries (Amendment) Act 2013.

[12]             See contribution of Dara Murphy, Dáil Debates, 10 October 2012, Vol 778 No 1,  111.

[13]             See contribution of Alan Farrell, ibid, 90.

[14]             Paschal Donohoe, ibid, 99.

[15]             Micahel McGrath, Dáil Debates, 9 October 2012, Vol 777 No 4, 540.

[16]             See contribution of Pearse Doherty, ibid, 543 ff.

[17]             See European Commission, Interim Progress Report on the implementation of Council Directive 2011/85/EU on requirements for Budgetary Frameworks of the Member States (European Economy, Occassional Papers 128, February 2013, 2013), 45-46.

[18]             Fiscal Responsability Act 2012, pt 3.

[19]             See Alert Mechanism Report: Report prepared in accordance with Articles 3 and 4 of the Regulation on the prevention and correction of macro-economic imbalances COM(2012) 68 final, 19 and Results of in-depth reviews under Regulation (EU) 1176/2011 on the prevention and correction of macroeconomic imbalances COM(2013) 199 final, 3, fn 5. 

[20]             See Department of Finance, Irish Stability Programme April 2013 Update (2013), Foreword, 2. See Joint Committee on Finance, Public Expenditure and Reform: Stability Programme Update: Discussion with Minister for Finance, 30 April 2013.

[21]             Regulation 1467/97/EC on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies [1997] OJ L 209/1 as amended by Regulation 1056/2005/EC and Regulation 1175/2011/EU.

[22]             Department of Finance, Irish Stability Programme April 2013 Update, ch 8, 48.

[23]             See Ministers and Secretaries (Amendment) Act 2013.