Many participants in the Treaty debate dislike the idea of legislation that relies on the concept of a structural budget balance. Certainly, there are measurement challenges with this concept and estimates of the structural balance will be frequently revised (which is one reason why the Treaty includes a correction mechanism when cumulative deviations from forecasts grow too large). Still, I have yet to see an explanation as to what is a preferred alternative, given that a target for the overall budget balance is intrinsically procyclical (during a recession, a given target is more difficult to achieve).
So, conditional on desiring a target for some measure of the fiscal balance, a target for the structural balance is preferable to a target for the overall balance.
This leaves the challenge of robust measurement of the structural balance (see also my piece here). In the spirit of the “excessive imbalances” procedure stitched into the six-pack regulations, a nuanced approach is required that looks at a wide array of variables (GDP, credit growth, house prices, current account, competitiveness indicators) in order to assess the underlying structural macroeconomic position of an economy. While the European Commission estimates will be an important benchmark, the special features of the Irish economy mean that local capacity to analyse and forecast structural positions will be important.