The treaty explained

Floating voter's guide

Help! I want to vote on Thursday but I’m not sure which way.

You’re not alone – the last Irish Times opinion poll showed that 22 per cent of the electorate are still undecided.

The good news is that this treaty is a lot shorter and simpler than previous EU treaties. The bad news is that there is huge disagreement between the opposing sides as to its effects.

What, in a nutshell, is the treaty about?

Fiscal stability, says the Yes campaign. Continuing austerity, say those calling for a No.

That’s some divide. Why is this treaty being introduced at all?

It’s Europe’s attempt to get to grips with the continuing turmoil in the euro zone. Since runaway debt got us into this crisis, the aim now is to force countries to reduce debts and deficits and make it harder for them to break fiscal rules.

New regulations to strengthen the rules on fiscal governance have already been introduced, but it was German chancellor Angela Merkel’s idea to enshrine the new system in a treaty.

But because the UK and the Czech Republic opted out, it won’t be an EU treaty but an inter- governmental arrangement involving 25 of the 27 member states.

What does the treaty propose?

Under current rules, countries must keep their government deficits below 3 per cent of gross domestic product (which is a measure of all the goods and services produced in an economy). The rules have been widely flouted: Germany and France broke them as far back at 2002 and Ireland’s structural deficit is expected to be 7.5 per cent of GDP this year.

The treaty ratchets up the pressure on governments by specifying that the maximum structural deficit they can operate is 0.5 per cent. They would also have to agree to work towards specific targets.

The targets must be put into national law, and independently monitored. Further, this law would include a trigger for action in the event of the limit being exceeded.

Governments would be fined if they failed to introduce the required law. An automatic correction mechanism would oblige a country to correct the deficit by, for example, raising taxes or cutting spending.

However, the borrowing limits would not apply to countries in bailout programmes, as Ireland is.

Ouch. What’s the point of it all?

The objective is to shore up the ailing euro, reassure the markets and encourage good fiscal housekeeping habits, thereby lessening the likelihood of further bailouts – including a second one for Ireland.

What’s in it for Ireland?

We’re going to need more funding to run basic services after our current bailout ends at the end of next year. That will have to come from the markets or from European sources. However, the cost of borrowing on the market could become prohibitive if there is further turmoil as a result of the treaty collapsing. As for the other option, the introduction to the treaty states that countries that want to get funding from the EU’s new bailout fund, the European Stability Mechanism, can only access it if they ratify the treaty.

The Yes side includes those who think the new rules are intrinsically good and that we need to be able to access funding – the shortfall in 2014 alone will be €18 billion. Then there are those who chafe at the restrictions proposed but feel that we have no alternative but to ratify in order to maximise our funding options in the future.

Ah sure what harm then will it do to pass the treaty?

The treaty, which is 11 pages long, has nothing to say about a range of problems in Europe – poor financial regulation, competitiveness gaps between rich countries and poorer neighbours, or the problems of Greece. So it’s no magic bullet to return us to prosperity.

The No side claims it will make things worse by consigning countries like Ireland to endless austerity. The argument goes that the introduction of the euro and the single market took away much of Ireland’s monetary freedom, and now this treaty will remove our fiscal freedom. The new rules will move power to unelected bureaucrats in Brussels and in the European Central Bank in Frankfurt and away from the Dáil. By throttling the amount of money it can spend, the treaty makes cuts to basic services inevitable – to the tune of €6 billion in 2015, Sinn Féin claims. In addition, the Government’s power to stimulate the economy, for example through job-creating projects, would be severely curtailed.

What happens if Ireland says No?

For the first time, an EU treaty does not require the unanimous support of all member states. The fiscal treaty will come into force next January if 12 of the 17 euro countries have ratified it. The Government says Ireland would simply be left behind; the No campaign claims Europe will have to rethink its plans.

We’ve had Nice 2 and Lisbon 2 – couldn’t the Government simply call for a second referendum on the fiscal treaty?

This is legally permissible, but the Government says it won’t exercise this option.

I still need more information. Where can I get it?

Try the independent Referendum Commission at referendum2012.ieor a guide to the treaty and a related ESM treaty at taleoftwotreaties.tumblr.com