Portugal becomes first country to ratify EU budget pact

Friday 13 April 2012 16.37
Portugal becomes first euro zone state to approve new budget pact
Portugal becomes first euro zone state to approve new budget pact

Portugal's parliament has today approved a European Union pact that aims to make budget discipline the main rampart against debt crises - becoming the first EU member to do so.

The assembly also approved as expected the European Stability Mechanism, a firewall fund and the second new line of defence against debt contagion.

The pact specifies greatly increased rules on control of public finances. It was signed in Brussels in March by 25 of the EU states after tortuous talks.

Britain and the Czech Republic refused to sign up to the deal.

It will begin to be applied once it has been ratified by 12 countries.

The new rules mean that almost automatic sanctions will be applied against countries which allow their annual budget deficits to breach agreed limits.

It lays down a maximum structural deficit of 0.5% of gross domestic product, a maximum public deficit (including cyclical factors) of 3% of output, and a ceiling for debt of 60% of output.

Portuguese Prime Minister Pedro Passos Coelho argued strongly in favour of the pact, saying it was important to help Portugal "recover the confidence of markets".

Portugal is one of three euro zone countries to be rescued by the EU and the International Monetary Fund as alarm over the state of public finances pushed up borrowing rates on international bond markets to unsustainable levels first for Greece and then Ireland.

IBEC, the group that represents Irish business, today welcomed the news that Portugal has become the first country to ratify the EU Fiscal Treaty.

A recent IBEC survey of CEOs shows how important the euro and the Fiscal Treaty are to Irish exporters. Over 90% of exporters said Ireland's membership of the euro was important to the future prosperity of their business; while 75% said ratification of the Fiscal Treaty was important to the future prosperity of their business. An overwhelming majority of the businesses surveyed said they would be supporting ratification.