Tánaiste Eamon Gilmore announced last week that the referendum on the European fiscal treaty will take place on Thursday, May 31st.

This date will be seen as a positive by the many UCD undergraduates who are not registered to vote in Dublin, as second semester exams are set to conclude on May 12th. Taoiseach Enda Kenny has said that, unlike the referenda to ratify the Treaties of Nice and Lisbon, there will be no second vote if this treaty is defeated.

“It is a once off, so when the Irish people make their choice, that’s it.”

This is because the Fiscal Compact Treaty is an intergovernmental agreement and technically not an EU treaty, which means that it requires ratification by just twelve of the seventeen Eurozone members, and will enter into force for the other signatory nations regardless of how Ireland votes.

The treaty itself is just one part of the European community’s response to the financial crisis, which at one point was seen as a threat to the very future of the European Union.

The European Commission has proposed six new pieces of legislation which will take significant steps towards preventing such a crisis in the future, allowing it to intervene when it detects possible budgetary or macroeconomic problems in a Member State.

However, the central facet of the EU’s tirade against budgetary ill-discipline is undoubtedly the Fiscal Compact Treaty.

The supposed point of the treaty is to prevent Eurozone countries from running structural budget deficits. Under current EU law, Member States are legally required to avoid excessive government deficits and the Council can impose fines on a Member State if they are in breach of the rules.

What the new intergovernmental treaty proposes to do is oblige signatory nations ‘to transpose the “balanced budget rule” into their national legal systems, through binding, permanent and preferably constitutional provisions’.

The balanced budget rule “shall be deemed to be respected if the annual structural balance of the general government is at its country-specific medium-term objective, as defined in the revised Stability and Growth Pact, with a lower limit of a structural deficit of 0.5 % of the gross domestic product at market prices.” It is a complex rule, but it is complex for a reason.

Firstly, the “structural balance” is not an ordinary, arithmetic balance. It is a detailed estimate of what the budget’s surplus or deficit would be if the economy was not in a temporary recession or boom. The benefit of using this method is that poor budgetary decisions can be prevented; Ireland had a structural deficit for much of the Celtic Tiger period, but the government of the day was fooled into implementing policies of less tax and more spending by a real budget surplus, which led to an extremely harsh boom-bust cycle.

Secondly, the “country-specific medium-term objective” is to be proposed by the European Commission for each country on an individual basis, so Ireland would have to have at most a 0.5% structural deficit from the budgetary objective it agrees with the European Commission on a medium-term basis.

If the referendum is passed, the Oireachtas will legislate for an Irish Fiscal Advisory Council, which will be given the power to independently assess, and publicly comment on, the soundness of the government’s macroeconomic projections, budgetary projections and fiscal stance. This will prevent the government of the day publishing unaffordable and economically unsound budgets in an election year, as was the case in 2002 and 2007.

The most recent RedC/Sunday Business Post poll puts the ‘Yes’ vote at 60% of voters who expressed an opinion.

The ‘Yes’ campaign, which is supported by Fine Gael, Labour and Fianna Fáil, is confident that the referendum will pass on its own merits and is keen to distinguish it from controversial issues such as the Household Charge.

Meanwhile the ‘No’ side, backed by Sinn Féin and the technical group, has already dubbed it ‘The Austerity Treaty’.

Colin O’Shaughnessy