a) The budgetary position of the general government shall be balanced or in surplus.

b) The rule under point a) 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. The Contracting Parties shall ensure rapid convergence towards their respective medium-term objective. The time frame for such convergence will be proposed by the Commission taking into consideration country-specific sustainability risks. Progress towards and respect of the medium-term objective shall be evaluated on the basis of an overall assessment with the structural balance as a reference, including an analysis of expenditure net of discretionary revenue measures, in line with the provisions of the revised Stability and Growth Pact.

c) The Contracting Parties may temporarily deviate from their medium-term objective or the adjustment path towards it only in exceptional circumstances as defined in paragraph

d) Where the ratio of government debt to gross domestic product at market prices is significantly below 60 % and where risks in terms of long-term sustainability of public finances are low, the lower limit of the medium-term objective specified under point b) can reach a structural deficit of at most 1.0 % of the gross domestic product at market prices.

e) In the event of significant observed deviations from the medium-term objective or the adjustment path towards it, a correction mechanism shall be triggered automatically. The mechanism shall include the obligation of the Contracting Party concerned to implement measures to correct the deviations over a defined period of time.

Eoin Treacy's view This treaty might reasonably be described as the Stability and Growth Pact for slow learners. It is only reasonable that if a number of countries share a common currency that they should adopt relatively similar fiscal policies.

Balanced budgets are a significant challenge, particularly for those accustomed to deficit spending. Significant adjustment will be required for the foreseeable future, as well as a commitment to maintain discipline once deficits have been eliminated. As any dieter will testify, keeping the weight off, once lost, is often much more difficult than losing it in the first place. The recent support for various sovereigns through the ECB's purchases, the tightening of the Euro TED spread and recapitalisation of the banking sector are all positive developments. In aggregate these measures suggest a medium-term turning point has been reached. Nevertheless, the strictures of this new treaty will take time to bed in.

This treaty appears to assume that sovereigns pose the primary risk to financial wellbeing. It pays no heed to ineffectual regulation, profligate lending, irresponsible private sector borrowing or the presumed need to bailout even holders of unsecured corporate debt. The mooted financial transaction tax looks to be nothing more than an attempt to generate revenue. It does nothing to tackle regulatory issues. Without additional reform of the financial sector, the risk of future crises remains high despite the fiscal compact.