Minister of Finance Michael Noonan has said he is confident the European Commission will approve Budget 2016 in the coming weeks, despite concerns from members of the troika that the Government's spending plans are too expansionary.
Mr Noonan was speaking as representatives of the European Commission, European Central Bank and IMF arrived in Dublin for a week-long meeting with officials from the Department of Finance, Central Bank and main pillar banks.
Speaking in Brussels ahead of a eurogroup meeting of finance ministers, the Minister said he had been assured that the budget would be acceptable within budget rules.
Fiscal rules
“We have given the commission all the documents, and the commission have assured us informally that the budget is totally in accord with the fiscal rules and are quite happy with the approach we’re taking.”
He said that this week’s visit was a separate process to the commission’s annual assessment of the budget.
“The primary purpose of the post-programme assessment is to see can Ireland continue to repay its debts, and in the context of the troika it’s to repay the official debt to the countries that lent to us, and of course, we’re absolutely confident that we’re in a very strong position to repay the debts.”
Ireland is subject to two post-programme surveillance missions by the Troika each year until 75 per cent of its bailout loans are repaid, a process that is likely to take decades.
The European Central Bank in particular is concerned that the budget unveiled by the Government last month fails to sufficiently address structural reforms and reduction of debt levels.
Windfall gains
Though the European Central Bank is not formally involved in the budgetary assessment process, it can technically demand budgetary changes if it feels the country is not in a position to repay its debts.
Minister Noonan also rejected criticisms of the budget from other quarters, including the Irish Fiscal Advisory Council, which criticised the budget's "over-expansionary fiscal stance," even after its head, Prof John McHale, retracted his suggestion that the budget could be in breach of EU budget rules.
“The criticism made by the Irish Fiscal Council was admitted by their chairman to be based on an error,” Mr Noonan said yesterday. “He had missed the fact that the commission published in June what the target was for adjusting the structural deficit, and subsequent to his initial criticisms he admitted he was wrong. He didn’t stand over anything. He admitted he was wrong.”
He also said he had taken on board pre-budget advice given to the Government ahead of the budget by Central Bank governor Patrick Honohan which warned of the danger of using "windfall fiscal gains to justify long-lasting spending commitments."
The European Commission could rule on the budget of euro zone member states as early as next Wednesday, with a eurogroup meeting scheduled to review the assessments on November 23rd.
