Ireland needs to deliver a balanced budget that doesn't "stray an inch" from European Union fiscal rules Brian Hayes MEP warned on Monday.
The comments come as speculation mounts that tax cuts may not be as great in tomorrow's inaugural budget from Minister for Finance Paschal Donohoe as initially envisaged, given the expense in widening the standard rate band and the moderate scale of how much the goverment has available to spend.
Mr Hayes agrees that Ireland needs to stay within the rules, arguing that any move beyond this could put the country in jeopardy of not balancing its budget next year, “a remarkable achievement given that we only exited our bailout programme less than four years ago”.
“We came through the financial crisis well but we are still dealing with legacy issues, especially in terms of debt and deficit levels. This means that our budgets cannot go overboard on spending or tax cuts; we need to be prudent in how we use the fiscal space available to us. We still have to remember that we are still running a budget deficit, we do not have surplus funds,” he said.
Mr Hayes said we need to move away from “giveaway budgets designed to win elections” and going back down the route of pro-cyclical fiscal policies, noting that if Ireland achieves its goal of reaching a balanced budget by next year, then it will have reached our Medium Term Objective under the fiscal rules.
“With a balanced budget, we have a great deal of flexibility to spend and ramp up capital investment. But removing our deficit by 2018 has to be the key priority,” he said.
