Additional Fiscal Effort: Scaremongering?

We pretty much know what is in store for us when it comes to fiscal adjustment over the next three years.  Here is a table take from last week’s Stability Programme Update.



We are looking at a further €8.6 billion of “consolidation” over the next three budgets.  The table shows the proposed spilt between expenditure cuts (€5.55 billion) and tax increases (€3.05 billion).  As we are in an Excessive Deficit Procedure there is nothing in the Treaty on Stability, Coordination and Governance that will change the targets.

The period after this has received some attention and there have been a number of claims that either or both of the 0.5% of GDP structural deficit limit and the “1/20th” debt reduction target will require further €X billions of fiscal adjustment in the post-2015 period.  Over the past few days I have heard a number of these claims in various debates.  Here are a few unearthed from a very quick search.

(1) “The Austerity Treaty would turn this recession into an economic depression. It would bring at least €5.7 billion additional cuts and taxes from 2015, on top of the €8.6 billion austerity up til then.”
(2) “This treaty will mean an extra €6 billion in tax increases and spending cuts post 2015. This will further depress consumer demand, pushing the domestic economy further into recession.”
(3) “On May 31, we are being asked to support an austerity treaty that will result in €6bn of extra spending cuts and tax increases being imposed on people post 2015. This is on top of the €8bn the Government intends to cut in the coming four years. If you are against austerity, you must vote against the austerity treaty.”
(4) “Debt should be 60 per cent of GDP. If debt is greater than 60 per cent, it will be reduced by 1/20 per year over the next 20 years. This would start in 2018, when the bailout terms expire, and could require up to €5 billion a year in savings to 2038.”
(5) “Ireland's debt to GDP ratio is likely to be around 120% in 2015 when we exit the bailout. Reducing the debt to GDP ratio by one twentieth of the excess per year will therefore mean reducing it by 3% of GDP per year. Without significant economic growth, that means paying back €4.5 billion per year in principal”

I’m not sure where the figures have come from but a figure of around €6 billion is attributed to the structural deficit rule and one of around €5 billion is attributed to the debt reduction requirement.

Over on irisheconomy.ie, Prof. John McHale has an excellent post on some budgetary arithmetic for fiscal rules that teases out some of the implications for Ireland after we leave the Excessive Deficit Procedure in 2015.  The conclusion is that there will actually be very little additional effort required to meet the requirements of the fiscal rules post-2015.

1. The Debt Reduction Rule

This is the straightforward one and it is one we have looked at before.  For a start it is important to note that Ireland will not be subject to the debt reduction rule until three years after we leave the excessive deficit procedure.  The rule will begin to apply from 2018.

Here is a table that shows the IMF projections for Ireland for 2017 and shows the overall budget balances that would be allowed if nominal growth was 3.5% per annum.



The starting nominal GDP from 2017 is the IMF projection.  The figures for 2018 to 2021 are based on a nominal growth rate of 3.5% per annum.  This is lower than the 4.5% per annum that the IMF are projecting for 2015, 2016 and 2017.

The 2017 gross debt is also the IMF projection which gives the starting debt ratio of 109.2% of GDP.  The debt ratio from 2018 onwards are those that would be required to satisfy the “1/20th” debt reduction benchmark.

The change in gross debt is the annual change in debt that is allowed.  It can be seen that this is always positive.  The level of debt can increase in each year.  There is no requirement to repay debt and definitely no requirement for annual payments of €5 billion per annum. 

The final column is the key one.  This gives the allowable budget balance to satisfy the debt brake rule.  The €8.6 billion of adjustments is designed to bring the deficit below 3% of GDP by 2015.  The IMF projections for 2016 and 2017 are based on a “no-policy change” scenario.  By 2017 they project that the deficit will be down to 1.9% of GDP. 

Continuing the IMF scenario into 2018 it is likely that the deficit would be around 1.4% of GDP in 2018.  This is only 0.3% of GDP (€0.6 billion) away from the deficit required to satisfy the debt brake rule.  As the debt reduction requirement is calculated over a three-year average it is likely that the expected outcomes for 2019 and 2020 would allow us to satisfy the debt reduction requirement.

Using the IMF’s projections and assuming 3.5% nominal GDP growth from 2018, Ireland can satisfy the debt reduction rule with no additional fiscal effort.  There is no guarantee that this scenario will come to pass but it is difficult to see how the kind of assumptions that would give arise to annual repayments of around €5 billion per annum could come to pass.  It is far more likely that we will be allowed to borrow small amounts rather than have to make the repayments suggested.

2. The Balanced-Budget Rule

The balanced-budget rule is a little more involved.  This is the rule that requires a cyclically-adjusted or structural budget balance of no more than –0.5% of GDP.  Last week’s Stability Programme Update says that using the European Commission methodology it is forecast that Ireland will have a structural deficit of 3.5% of GDP in 2015.

There is no transition period when a country leaves an EDP so the balanced budget rule becomes applicable in 2016.  What matters here is the pace of reduction and as we pointed out previously the requirement is an improvement of 0.5% of GDP towards the budget objective.  What will happen in Ireland post-2015?  Will be have to undertake €6 billion of additional fiscal adjustment to satisfy the balanced-budget rule?



The starting point here is the structural deficit of 3.5% of GDP given in the SPU.  Next it is assumed that nominal GDP will go by 3.5% per annum (this is lower than the IMF projections of 4.5% per annum).
The coefficient of elasticity is the impact of the growth rate on the structural balance.  There is no way of knowing what this is but we will follow the figure of 0.2 used by Prof. McHale.  Using this figure a nominal growth rate of 3.5% is expected to improve the structural balance by 0.7 percentage points of GDP per annum under the assumption of “no policy change”, i.e. no additional adjustment.  This is in excess of the 0.5% of GDP improvement required under the Stability and Growth Pact.

By 2019 it can be seen that the structural deficit would be down to –0.7% of GDP.  Using the projections here this is achieved with no additional fiscal effort and is in line with Council Regulation 1055/2005 which says that countries should aim “to gradually reach the medium-term budgetary objective”.

There is no guarantee that this is what will happen.  The IMF’s debt projections for 2017 and the DoF’s structural deficit projection for 2015 are only estimates.  They are very unlikely to be wholly accurate.  The assumed 3.5% nominal growth rate in the subsequent four year period is only a conjecture.  For what it’s worth Ireland’s nominal GDP growth rate from 1971 to 2010 averaged 11.5% per annum.  However, the scenarios do show what could happen and, in my opinion, are based are fairly prudent assumptions.

It is possible that Ireland could satisfy the conditions of the debt-reduction rule and the balanced-budget rule without any additional fiscal adjustment after 2015.  There are plenty of accusations of scaremongering in relation to official funding floating around.  Are claims of €5 billion and €6 billion of additional fiscal adjustment after 2015 more of the same?

Of course, it should also be pointed out the the result of the referendum will not change the necessity to satisfy the fiscal rules.  These rules are all elsewhere in EU regulations and the Fiscal Compact element of the Treaty just restates them.  We have already committed to adhere to them.  In fact, even if the referendum is defeated we could still introduce a Fiscal Responsibility Bill that incorporates these fiscal rules.  The referendum is to allow us to ratify (become a signatory of) the Treaty.

Hitting the structural deficit target

Article 3 of the Treaty on Stability, Cooperation and Governance states countries are to aim for a structural budget deficit of no more than 0.5% of GDP. 

The original balanced budget rule was introduced as part of the Stability and Growth Pact in 1997 when member countries committed “themselves to respect the medium-term budgetary objective of positions close to balance or in surplus”.  This was revised in 2005 and the rule was restated in terms of the structural balance rather than the overall balance.

At present this is not an issue for Ireland.  As our overall deficit is above 3% of GDP we are in an Excessive Deficit Procedure (EDP).  We will remain in the EDP as long as the deficit is above 3% of GDP.  This year it is forecast that the deficit will be around 8.3% of GDP and it is estimated that it will be 2015 before we leave the EDP.  On leaving the EDP we will then become subject to the balanced budget rule.

Ireland first set a Medium-Term Budgetary Objective (MTO) in terms of the cyclically-adjusted or structural budget balance in December 2005 when we set as “close to balance” (discussed here).  The current MTBO is a structural deficit of –0.5% as stated on page 31 in last week’s Stability Programme Update.

As discussed in last year’s SPU, Ireland’s ‘medium-term budgetary objective’ (MTO) currently stands at -0.5% of GDP. This objective was set well in advance of the Inter-Governmental Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (the ‘Stability Treaty’). Ireland is making progress towards the achievement of its MTO, with further progress to be made in the post-2015 period on a phased basis, in accordance with a timeline to be agreed.

Up until 2015, or whenever it is achieved, the fiscal target will be to bring the overall deficit below the 3% of GDP limit.  In the post-2015 period we will be subject to the balanced budget rule and must move towards meeting the MTO (which is subject to revision).

Firstly, it is very impossible to know what the structural balance actually will be in 2015.  Tables A5 and A6 on page 53 of the SPU provide some estimates from the Department of Finance.  Using the European Commissions methodology they estimate a structural balance of –3.5% of GDP and using the approach of the IMF the figure is –2.5% of GDP.  Taking the midpoint (though the EC’s approach will take precedence for the EU’s fiscal rules) it seems we are set to have a structural deficit of around 3% of GDP in 2015.  At this remove these estimates can only be considered to be tentative.

So if the structural deficit is 3.0% of GDP how quickly does it have to be reduced to the 0.5% of GDP limit?  The SPU says it will be done “on a phased basis, in accordance with a timeline to be agreed.”  This is true and it is likely to be much more moderate than the current timeline to bring the overall deficit under the 3% of GDP limit.

The answer was actually provided in June 2005 in Council Regulation 1055/2005 which forms part of the Stability and Growth Pact.

The Council, when assessing the adjustment path toward the medium-term budgetary objective, shall examine if the Member State concerned pursues the annual improvement of its cyclically-adjusted balance, net of one-off and other temporary measures, required to meet its medium-term budgetary objective, with 0,5 % of GDP as a benchmark. The Council shall take into account whether a higher adjustment effort is made in economic good times, whereas the effort may be more limited in economic bad times.

This is confirmed in the revised Code of Conduct for the Stability and Growth Pact which was published in January of this year.  A slightly abridged version of the section on reaching the MTO is below the fold and, as can be seen, it is not lacking in get-out clauses.

2) The adjustment path toward the medium term budgetary objective and deviations from it

Fiscal behaviour over the cycle and adjustment path toward the MTO

Member States should achieve a more symmetrical approach to fiscal policy over the cycle through enhanced budgetary discipline in periods of economic recovery, with the objective to avoid pro-cyclical policies and to gradually reach their medium-term budgetary objective, thus creating the necessary room to accommodate economic downturns and reduce government debt at a satisfactory pace, thereby contributing to the long-term sustainability of public finances.

Sufficient progress towards the MTO shall be evaluated on the basis of an overall assessment with the structural balance as the reference, including an analysis of expenditure net of discretionary revenue measures.

Member States that have not yet reached their MTO should take steps to achieve it over the cycle. Their adjustment effort should be higher in good times; it could be more limited in bad times. In order to reach their MTO, Member States of the euro area or of ERM-II should pursue an annual adjustment in cyclically adjusted terms, net of one-off and other temporary measures, of 0.5 of a percentage point of GDP as a benchmark.

For Member States that have not yet reached their MTO and are faced with a debt level exceeding 60% of GDP or with pronounced risks in terms of overall debt sustainability, a faster adjustment path towards the medium-term budgetary objectives should be expected, i.e. above 0.5 of a percentage point of GDP as a benchmark in cyclically adjusted terms, net of one-off and other temporary measures.

Based on the principles mentioned above and on the explanations provided by Member States, the Commission and the Council, in their assessments of the Stability or Convergence Programmes, should examine whether a higher adjustment effort is made in economic good times.

In case of an unusual event outside the control of the Member State concerned and which has a major impact on the financial position of the general government or in periods of severe economic downturn for the euro area or the Union as a whole, Member States may be allowed to temporarily depart from the adjustment path towards the medium-term objective implied by the benchmarks for the structural balance and expenditure, on condition that this does not endanger fiscal sustainability in the medium-term.

What’s on the table?

Today Irish Times carries an opinion piece from Prof. Terence McDonough of NUIG on the Treaty on Stability, Cooperation and Governance.  It is headed ‘Treaty not a safe option but a perilous experiment’.

I agree with some the article says in relation to the funding options available to Ireland in the event of a ‘No’ vote.  Towards the end of the article there is a summary of “what’s on the table” in four points.  There are a number of parts in this list that I disagree with.

1. Structural deficits for Ireland should be about half of 1 per cent of GDP, with a 3 per cent top limit on the headline deficit even in the worst years. This requirement seriously compromises government ability to end recessions.

The implementation of the 0.5 per cent structural deficit rule in the new treaty is considerably more stringent than any of the existing “six-pack” regulations, which are themselves unwise. Eventually, a shortage of government bonds will emerge, forcing conservative investors such as pension funds into less safe investments, risking the reappearance of dangerous asset bubbles.

The 0.5% of GDP target for the structural deficit is not ‘new’ and is not more stringent than the existing ‘six pack’.  The balanced-budget rule in terms of the structural deficit has been in place since June 2005 as we discussed here.  In fact the current rule is actually less stringent than that proposed in 2005. 

In the March 2005 document approved by the Commission as the template to revise the Stability and Growth Pact, the rule required high-debt countries to have  structural balances that were “in balance or surplus”.  This is slightly relaxed in the 2012 Fiscal Compact with high debt countries allowed a structural deficit of up to 0.5% of GDP.

The balanced-budget rule is restrictive and will bring government debt levels down to low levels as previously discussed but it is not so because of the Fiscal Compact.

2. Debt should be 60 per cent of GDP. If debt is greater than 60 per cent, it will be reduced by 1/20 per year over the next 20 years. This would start in 2018, when the bailout terms expire, and could require up to €5 billion a year in savings to 2038.

This is utterly wrong.  The debt brake rule, which on this occasion is part of the “six pack” and was introduced as part of Council Regulation 1177/2011 last November.  The regulation makes no reference to 20 years.  What it does specify is that if a country’s debt ratio exceeds the 60% of GDP threshold, then the country must close one-twentieth of the gap between the current level and the 60% threshold (and doing so on average over a three-year period is sufficient).

Consider a country with a debt equal to 100% of GDP.  This is 40 percentage points above the threshold.  In order to satisfy the rule one-twentieth of this gap must be reduced.  One-twentieth of 40 is 2, thus the following year the indicative target for the debt ratio is 98% of GDP.

This can be easily achieved with growth and inflation.  With 2% growth and 2% inflation this country could satisfy the conditions of the debt brake with a deficit of close to 1.9% of GDP.  In the second year GDP would be around 104 and the nominal debt 101.9 giving a debt ratio of 101.9/104 = .98.

Here are some indicative nominal debt levels at different nominal growth rates for a country that starts with a debt ratio of 120% of GDP.

In the extreme case of no nominal growth for 20 years the debt must be reduced from 120 to 81.5 over the 20 years with very moderate debt reductions in the second 10 years.  With just 2% nominal growth (the ECB’s inflation target plus zero real growth) the debt stays relatively constant and is up slightly to 121.1 after 20 years.  In this scenario the debt must fall marginally for the first 10 years and then can increase gradually after that.

In a more typical scenario of 4% nominal growth (say 2% inflation and 2% real growth)  then the actual debt must never be reduced.  Deficits are around 2% of GDP are allowed right from the start and over the 20 year period shown above the nominal debt can increase from 120 to 178.6.  The level of debt increase allowed is even greater with 6% nominal growth.

Today’s article says that the debt brake rule “could require up to €5 billion a year in savings to 2038”.  I am not sure what this means.  By using the word savings I assume this is money put on deposit or, in this case, money used to pay down debt.  There is no plausible scenario in which Ireland will have to reduce the debt by €5 billion per annum. 

Even with zero nominal growth such repayments would not be required.  Any nominal growth close to 2% will mean the debt level has just to be maintained and if nominal growth is above 2% the amount of debt can actually be increased.  From 1971 to 2010 average annual nominal GDP growth in Ireland was 11.5%.

3. Even after we reach this target, Ireland will be forced to run primary surpluses, that is excluding interest payments on the national debt, for many years, taking steam out of the economy.

Ireland will have to run primary surpluses for the foreseeable future but this will probably not be the case if we can reach the target of the 60% of GDP threshold.  If we ever get the debt back to 60% of GDP then we will only be required to run primary surpluses if the interest rate exceeds the nominal growth rate.  This might not happen and small primary surpluses might be required to keep the debt ratio at 60% but there nothing to suggest that “Ireland will be forced to run primary surpluses”.

If will take decades for the debt to approach the 60% threshold and, of course, this limit does not come from the Stability Treaty.  It was first introduced as part of the Maastricht Treaty in 1992.

4. If these conditions are violated, control over fiscal policy is ceded to Europe and the European Court of Justice.

This is just plain wrong.

The Structural Deficit Rule

Here is an extract from a Department of Finance document:

“The underlying (structural) budget balance […]  respects the terms of the Stability and Growth Pact, and is consistent with a medium-term objective of keeping the budget close to balance”

This document set Ireland’s medium term budget objective as a structural budget balance of 0% of GDP, i.e. balanced.  This document was the December 2005 Stability Programme Update published with Budget 2006.  The quote is from page 5.

It is nearly six and a half years since Ireland first announced the target of a budget with a structural balance of 0% of GDP.  In fact, most EU countries set similar targets in 2005.  This table is taken from page 47.



The range of medium-term budget objectives is from a low of –1.0% to GDP for four countries to balanced or “close to balance” for Ireland and eight other countries, up to a high of +2.0% of GDP for Sweden.  These are all in line with the provisions in the Fiscal Compact component of the Treaty on Stability, Cooperation and Governance agreed in January of this year.

As part of the 2005 revision of the Stability and Growth Pact, Council Regulation 1055/2005 was introduced in June 2005 which augmented the original Stability and Growth Pact with the following:

“Taking these factors into account, for Member States that have adopted the euro and for ERM2 Member States the country-specific medium-term budgetary objectives shall be specified within a defined range between – 1 % of GDP and balance or surplus, in cyclically adjusted terms, net of one-off and temporary measures.”

The original SGP from 1997 merely said that countries were “to adhere to the medium term
objective of budgetary positions of close to balance or in surplus” (Council Regulation 1466/97).  The structural deficit variation of the rule was introduced in 2005.

There is nothing new in the ‘balanced-budget rule’ in the Fiscal Compact.  Of course, just because something is already in place does not mean it is correct.  But if it is wrong why has it taken seven years for those who object to the balanced budget rule to voice their concerns?  A short chronology of the changes to the Stability and Growth pact is provided here.

Access to Official Funding

The issue of whether Ireland will have access to official funding after the current €67.5 billion of loans from the EU/IMF have been drawn down continues to get a lot of attention.  We first looked at this when the referendum was first announced and the conclusion remains the same.  The evidence suggests that Ireland will have continued access to EU funding until we have regained market access regardless of the outcome of the forthcoming referendum as long as we meet the terms of the programme.

The debate is centred around the so-called ‘blackmail’ clause that is included in both the Treaty on Stability, Coordination and Governance (The Fiscal Stability Treaty) and the European Stability Mechanism Treaty.   We don’t need to repeat both so here is the one from the ESM Treaty:

“It is acknowledged and agreed that the granting of financial assistance in the framework of new programmes under the ESM will be conditional, as of 1 March 2013, on the ratification of the TSCG [Treaty of Stability, Cooperation and Governance] by the ESM Member concerned and, upon expiration of the transposition period referred to in Article 3(2) TSCG on compliance with the requirements of that article.”

The process that saw this clause inserted into the Treaty at the start of February, even though the Treaty was originally agreed last July, has generated plenty of heat.  However, it seems reasonable if someone who is lending money wants to apply conditions to those who are trying to get access to that money.

One potentially crucial word is that it only applies to ‘new’ programmes from the 1st of March 2013.  Ireland is already in a programme and there already have been substantial changes to it. 

Initially €17.5 billion of the €67.5 billion to be provided by the EU/IMF was set aside for the banks.  After last March’s stress tests the drawdown for the banks was around €7.5 billion and the remaining €10 billion was shifted to provide additional funding for the day-to-day running of the State.  Could there be a further increase?

As the previous post pointed out this was actually agreed last July when the EU leaders announced that:

“We are determined to continue to provide support to countries under programmes until they have regained market access, provided they successfully implement those programmes. We welcome Ireland and Portugal's resolve to strictly implement their programmes and reiterate our strong commitment to the success of these programmes.”

This may not be the most tenable basis on which to believe that Ireland will have access to EU funds after the full amount of current loans have been drawn down but it is what the EU agreed.  It was reiterated as recently as the EU summit of the 30th of January when the statement of the EU leaders said that:

We welcome the latest positive reviews of the Irish and Portuguese programmes which concluded that quantitative performance criteria and structural benchmarks have been met. We will continue to provide support to countries under a programme until they have regained market access, provided they successfully implement their programmes.

That seems pretty unequivocal to me and this statement was released after the Stability Treaty was agreed and the so-called ‘blackmail’ clause had been introduced.   It has not been contradicted in any subsequent EU statements, and the applicability of the ‘blackmail’  clause to ‘new’ programmes does leave scope for the current Irish programme to be extended.

Poul Thomsen, an IMF Deputy Director in the European Department is of the view that the programme can be extended.  In a recent IMF seminar on Greece, Ireland and Portugal he said:

“The key here is, of course, that Europe has underscored, European leaders have emphasized that Europe stands ready to support these countries for as long as it will take to bring them back to market, provided, of course, that there’s steady progress under these programs. That is clearly unprecedented.”

Although only an observer, last week the ratings agency Standard and Poors released a short statement when the maintained their BBB+ investment grade rating of Irish government bonds.  In it they said:

However, we currently expect that the rating would remain investment grade following such an outcome. This is based on our expectation that even if the electorate were to reject the constitutional amendment in the May 31 referendum, political negotiations with Ireland's European partners could lead to official funding continuing beyond the current program that ends in 2013. If we were to conclude that Ireland would be effectively excluded from future official funding before regaining reliable access to market funding, we could lower the rating to speculative grade.

It is possible to find quotes in the S&P statement that are almost in contradiction to this.  The reason of course is that there are no absolutes in relation to this issue as the decisions are political. 

It is interesting to hear the couched words by many of those discussing this issue.  A rejection of the Treaty will have clear implications if Ireland requires assistance at some future date but from what I can see there is little to prevent Ireland’s current programme with the EU being extended in 2014. 

Social Welfare Payments

In preparation of a recent discussion I went looking for the rates of social welfare payments over the past few years.  These are usefully provided as part of the supplementary documents produced with the Budget.

Here are social insurance payments (made from the Social Insurance Fund into which PRSI contributions are paid) from the 2007, when the economy and tax revenue peaked, right through the current rates in 2012.  The table just provides the personal rates.

All Social Insurance payments are higher than they were in 2007.  For Pensions this is as much as 10%, but for Illness, Jobseeker’s, Injury and other Benefits that increase is a much more modest 1%.  All of the payments increased between 2007 and 2009, and while some have of them have subsequently been reduced none are below their 2007 levels.

Here are the Social Assistance payments (made by the Department of Social Protection and funded from general taxation).  Again only the personal rates are provided.

Again most payments are above the 2007 levels.  The exceptions are Jobseeker’s Allowance for the under 24s and Child Benefit for all children with the reduction for the third child being the greatest.

A full list of the all the payments and rates for qualified adults/children can be read here.

It is also  important to factor in inflation to determine the real changes in the rates.  For example, in December 2007, the CPI excluding mortgage interest was at 103.1 (using the 2006 base).  In December 2011 this index was at 104.2.  That is a rise of 1.1% over the four years. 

Here are changes that have taken for some of the main commodity groups in the CPI over the same period.

In the first three months of 2012, the CPI excluding mortgage interest has risen 1.9%.

Quote-unquote

Today’s meeting of the Oireachtas EU Affairs sub-committee on the Stability Treaty had Sinn Fein leader Gerry Adams in front of it to present the views of his party.  I’m sure the session covered lots of interesting facets of the debate but an exchange Mr. Adams had with Fine Gael deputy Paschal Donohue has been picked up by most of the coverage of the session. See here, here and here.

The exchange focused on a leaflet Sinn Fein has produced on the Stability Treaty referendum.  The full leaflet can be seen here and this is the part that was in question today.



The comments focused on the sources of the quotes used from some “experts”.  Karl Whelan (an expert without the quotation marks) had already flagged this as early as last Thursday.  Here is a video showing today’s discussion courtesy of journal.ie.

It is an entertaining exchange but it doesn't add a huge amount to the debate on the actual issues relating to the Treaty. The Sinn Fein leaflet quotes me as saying:

“Had the Fiscal Compact being in place since 1999 it would not and could not have prevented the crisis in Ireland”

This quote is 100% accurate and, of course, is true.  It is taken from my opening presentation to the Joint Oireachtas EU Affairs Committee meeting from the 22nd of February (transcript) and is also referred to in my written submission to the Committee.  Here is some of the text from the transcript surrounding the quote.

However it must be acknowledged that it is not just the treaty that will impact on countries. An important change during the past couple of months has been the adoption of the six pack, which has not received sufficient attention. Had the fiscal compact been in place since 1999, it could not and would not have prevented the crisis in Ireland because we would have satisfied the structural deficit and debt break rule during the last five or six years prior to the crisis. As such, it would not have helped us in terms of avoiding the crisis.

Some elements of the six pack are important and may have to some extent alleviated the crisis in which we now find ourselves.

I repeated the view in bold as quoted in the leaflet towards the end of my remarks.

The fiscal compact would not have prevented the Irish crisis. While there are issues about the flexibility it offers, the so-called six pack and the further measures in place would have, if applied retrospectively, had an impact.

These measures are the government expenditure rule and the Macroeconomic Imbalance Procedure both of which now form part of the toolkit to be used when fiscal and economic performance in EU members is being assessed but are not included in the Stability Treaty.
In his questioning of Gerry Adams, Paschal Donohoe quoted me as saying:

“If the Treaty is rejected we will be forced to adhere to the budgetary rules anyway but will be denied access the new European Stability Mechanism (ESM) bailout fund.  We cannot avoid the fiscal rules in the Treaty.  All in all there is little to be gained from rejecting the Treaty.”  

Again this quote is 100% accurate.  This is extracted from the final paragraphs of a recent article I wrote for The Evening Echo.

If the Treaty is rejected we will be forced to adhere to the budgetary rules anyway but will be denied access the new European Stability Mechanism (ESM) bailout fund. This will have no impact on the current EU/IMF programme we are in and, if necessary, this programme can be extended.  However if Ireland needs to enter a new programme of assistance at some time in the future we will not be granted assistance via EU loans and may be left in a vulnerable funding position.

There is little that is new in the Treaty, and some of the rules governing fiscal policy in the EU have been left out altogether.  It is hard to know why this Treaty is necessary, apart from appeasing voters in France and particularly Germany.

We cannot avoid the fiscal rules in the Treaty.  We cannot avoid the measures necessary to bring our deficit under control.  The Treaty may be part of a long-term move for a more fiscally-integrated Europe.  This would be a real change and one we should be part of.  All in all there is little to be gained from rejecting the Treaty.  

The parts in bold were used by Paschal Donohue today.   All in all, it is a little ado about nothing. 
There are many strands to the EU response to the current crisis.  They won’t all be right but they should not be considered in isolation.  Focusing on short, and sometimes abridged, quotes can provide some entertaining parlour games but does not get us any nearer a full understanding of the issues involved.