Minister for Finance Michael Noonan has called on the European Commission to grant greater flexibility to Ireland in the application of budget rules to allow more "budgetary space" in October's budget.
Mr Noonan raised the issue directly with German finance minister Wolfgang Schauble and the European Commission during two days of meetings in Brussels, at which EU finance ministers backed a proposal to grant France two extra years to meet its EU deficit targets.
While Minister Noonan said he had supported the proposal to grant France two extra years to meet its targets, he wanted flexibility for all member states.
“I supported the Commission proposal, including the extension to France both and the euro group and the ecofin, but I used the opportunity to say that we needed the flexibility in the application of the rules as well.”
Although Ireland is the fastest-growing economy in Europe, it is constrained in the amount of investment it can make, due to strict EU budgetary rules, which state that countries cannot spend more than their growth rate. "The way of calculating your growth rate shows us growing at 0.6 per cent when in fact the Commission themselves say that we are growing at 3.5 per cent," said Minister Noonan, pointing out that the Commission uses a formula based on Ireland's recessionary years.
“I am saying if you’re giving discretion to six or seven European countries including France, we want discretion as well, but our discretion is in the application of the rules.”
Minister Noonan declined to predict which areas of the economy could be pinpointed for extra investment in October’s budget, though it is understood that housing, healthcare and welfare are among the areas where the coalition government is considering further investment, as it eyes another expansionary budget after years of recession.
“The relevance... is to give me budgetary space to make decisions for the 2016 budget that I’ll be introducing in October. Whether I use the space or not is not the issue, it’s simply to give me the space so that I’m not inhibited by European rules to spend money that I think is necessary,” the Minister said. “The way the tax take is going and the way the growth figures are going, we’ll have money, we’ll still be able to bring the deficit down again next year significantly,” he said, adding that the deficit in the next budget will probably “begin with a 1.”
He added that he expects Ireland’s growth rates to be around 4.7 per cent when exchequer figures are published on Thursday. “I’d be surprised if we were below 4.7,” he said.
Minister Noonan said he had asked the European Commission to task its technical officials with engaging directly with officials in the Department of Finance in order to find a more "reasonable result that corresponds with reality rather than theory."
“I think I’ve made progress,” he added.
European finance ministers today signed off on a proposal to grant Italy, France and Belgium to reach EU debt and deficit targets. It is understood that a number of countries, including Spain, Estonia and Malta, raised concerns that France and other member states were receiving preferential treatment from the European Commission on budget targets.
In a statement released following the meeting, ministers said that “the Council found that extending the deadline for correcting the deficit was justified by the fiscal effort made by France since 2013, and by the current weak economic conditions and other factors.”
It stressed that France would be bound by strict monitoring over the next few months.
France has repeatedly missed its budget deficit targets in recent years as the government of Francois Hollande has struggled to implement fiscal reforms.
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