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The Fiscal Compact Referendum: What are we voting on and why?

Here’s’s guide to Ireland’s referendum on the new fiscal treaty.

YESTERDAY AFTERNOON, Taoiseach Enda Kenny announced that Ireland would hold a referendum on the recently-agreed European Fiscal Compact Treaty.

Addressing the Dáil, Kenny said that he believes it is “very much in Ireland’s national interest” that the treaty is approved, but its critics say it could lock the government into more years of austerity budgets.

So, what is that treaty – and why are we voting on it?

What are we voting on?

Twenty-five of the 27 EU members have agreed a new treaty which proposes to tighten fiscal discipline among member states. The terms of the treaty were negotiated and designed in a bid to prevent another debt crisis.

The Fiscal Compact Treaty includes what has been termed a ‘debt brake’. This legally-binding limit would cap each member’s budget deficit in relation to the size of their economy (ie below 3 per cent of GDP). Governments also have to ensure that public debt don’t exceed – or is sufficiently declining towards – 60 per cent of GDP.

Member states who breach the debt limits can be financially penalised. This penalty cannot exceed 0.1 per cent of that state’s GDP.

All 17 members of the eurozone have agreed to sign up to the agreement. (Of the EU’s 27 members, only the UK and the Czech Republic have declined to sign.)

The Taoiseach has previously said that Ireland’s receipt of bailout funds are not dependent on any such referendum being passed because the state is already in a fiscal programme for which the relevant arrangements and agreements are already in place. These agreements supersede the new fiscal compact, he said.

However, the treaty would give Ireland access to future emergency funds from the European Stability Mechanism, which is being limited to participants of the fiscal compact treaty. The €500 billion permanent bailout mechanism is planned as a replacement for the current European Financial Stability Fund (EFSF) and is expected to be introduced later this year.

Why are we holding a referendum?

Under Article 46 of the Irish Constitution, any change to the Constitution requires a referendum being put to the people. The Attorney General must determine whether any proposed amendments are significant enough that they require a referendum for approval before being introduced into the Constitution.

The new treaty’s text appeared to allow for members to adopt the treaty without it being incorporated into their constitutions. In Ireland, it falls to the Attorney General to advise the government on a whether a treaty’s ratification requires a referendum because of the above Constitutional clause.

AG Marie Whelan has advised the government that it is best for Ireland to hold a referendum before ratifying the Fiscal Compact Treaty.  On foot of that advice, the Taoiseach and Tánaiste announced yesterday that a referendum would be held on the issue, and that the treaty will be debated over the coming weeks.

No date has yet been set for the treaty referendum.

Speaking on RTÉ’s Drivetime yesterday, Minister for Justice Alan Shatter said that this was an important referendum and it is not a case of getting it out of the way quickly. He added the cabinet had not yet discussed a timeframe for the vote.

The Referendum Commission is an independent body which explains the subject matter of referendum proposals ahead of the vote. Under the Referendum Act 1998, the Minister for the Environment will appoint a Referendum Commission to inform the public ahead of the Fiscal Compact Treaty referendum.

What are the arguments for and against?


In the weeks between the Fiscal Treaty agreement and the Attorney General’s advice that Ireland should hold a referendum on the issue, a number of arguments have been put forward by politicians and organisations in favour of either a yes or a no vote.

In his Dáil address yesterday, the Taoiseach said that a ‘yes’ vote in the referendum on the fiscal compact treaty would “build on the steady progress the country has made in the past year” and encourage investor confidence in Ireland.

“Putting in place this credible commitment to responsible budgeting will be key to keeping interest rates low and unlocking credit availability for investment and job creation,” Kenny said. “Lower interest rates also mean more resources for the provision essential public services.”

Meanwhile, Tánaiste Eamon Gilmore said that “what this will come down to is a vote for economic stability and economic recovery”. He also said that a ‘yes’ vote would support international confidence in the Irish economy and promote the state’s fiscal recovery.

Opposition parties have welcomed the referendum, but were divided on whether the treaty is the right move for Ireland.

Fianna Fáil’s Micheal Martin said that his party supports the treaty, but warned that it would not pass unless people were being engaged in the issues involved. “The people need to be taken on our journey through the EU,” he said.


Sinn Féin has warned that the treaty could lead to further austerity measures being introduced as the government pushes to meet its debt limit under the treaty. Gerry Adams TD said yesterday that the treaty will not help to regenerate the economy but will instead “condemn the people, particularly those in lower- and middle-income brackets, to this government’s terrible austerity policy.”

Late last month, the Fiscal Advisory Council recommended against introducing the measures proposed under the treaty into the Irish Constitution, warning that they would not have the necessary flexibility if enshrined in the Constitution.

The council – established last year to offer independent analysis on whether the government is meeting budget targets or not – said that methods of enforcing the proposed fiscal limits could be strengthened while allowing for democratic control by introducing the measures in national legislation, rather than in the Constitution.

Read the text of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union >

As it happened: Govt announces referendum on EU fiscal compact treaty >

“A sustainable economic recovery”: FULL text of Tánaiste Eamon Gilmore’s EU referendum speech >

“In Ireland’s national interest”: FULL text of Taoiseach Enda Kenny’s EU referendum speech >

Government confirms referendum on EU fiscal compact treaty >

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