Jim Mitchell
Question:28 Mr. J. Mitchell asked the Minister for Finance his views on the stability and growth pact. [30207/01]
Priority Questions. - Stability and Growth Pact.
The stability and growth pact requires member states to commit themselves to aim for a medium-term budgetary position of close to balance or in surplus. The pact clarifies the implementation of the excessive deficit procedure provided for under Article 104 of the treaty and it also provides for the strengthening of the surveillance of member states' budgetary positions.
Under the stability and growth pact, the main elements of which were agreed at the European Council in Dublin in 1996, the majority of member states have moved from having general government deficits to running surpluses and all have reduced their general government debt levels, a development which will underpin the capacity for economic growth in the EU going forward.
As recently as 21 September, the ECOFIN Council in Liége reaffirmed its commitment to the stability and growth pact in a statement on the economic impact of the 11 September attacks in the United States. In the statement, the council made clear its "commitment to the framework, rules and full implementation of the Stability and Growth Pact". As far as I am concerned, nothing has changed in this regard since then.
For our part, as stated in the ECOFIN Council's opinion on last year's stability programme update, Ireland continues to comply fully with the terms of the stability and growth pact. Last year, we had one of the highest general Government surpluses of any European member state and had the second lowest debt to GDP level in the European Union. An updated stability programme will be published as usual on budget day.
Does the Minister accept that budgetary policy in this and every other country in the euro zone is an issue of common concern and therefore that observations by the European Council of Ministers, the European Commission or the governments of other member states should be considered in a polite and constructive way?
The question relates to the terms of the stability and growth pact. Ireland is the leading light in terms of compliance with the terms of the pact. Every member state must com ply with the terms of the stability and growth pact.
There have been recent suggestions by unnamed senior European sources that the pact might be interpreted with more flexibility. These suggestions were rejected within days by the European Central Bank saying that this was not the view of the ECB. Many people speculated that flexibility could be used to ease the positions in which some of the larger member states found themselves.
The Deputy may be referring to the difficulties which arose last year regarding the broad economic policy guidelines, a subject with which I have dealt on many occasions. The terms of the stability and growth pact and budgetary policy in that regard are a matter of common concern. The difficulties Ireland had with the EU Commission referred to differing interpretations regarding compliance with the broad economic policy guidelines.
Would the Minister not accept that the broad economic policy guidelines and the growth and stability pact are interconnected? The Minister has rejected the criticism, under the guidelines, that he was spending too much when the economy was growing apace. In retrospect, does he accept that the advice he rejected at the time was valid?
I do not. In fact, most of the people who criticised me at the time now say that the Irish plans for 2001 were the appropriate ones. Even economists who were most vociferous in criticising me said as recently as two months ago that I had been right, but of course for the wrong reasons. This shows that economics is an inexact science.
The commentators may have got it wrong then but I believe they are getting it wrong again. Just before last year's budget the Minister was able to announce the likelihood of a £3.5 billion surplus. Does he not consider it horrific that this year he almost certainly faces a deficit?
The economic situation, worldwide and in Europe, has changed dramatically over the past year. My critics attest to the fact that the Irish policy for 2001 has been the appropriate one. Imagine the situation if, in the light of declining world growth and of what has happened economically in Ireland and throughout the world, I had adopted a very restrictive budgetary policy last year? That would have taken further demand out of the economy and would have further depressed the situation. With the benefit of hindsight, most people agree that the Irish budgetary stance was the appropriate one.
Expenditure this year has grown by 21% over last year. Where is the benefit of that growth to be seen? Does the Minister agree that we do not have the output successes which should derive from such increased expenditure? Does he also agree that it is a normal part of the economic cycle to spend more in a downturn and less when the economy is booming? Does he accept that he has left himself without money to spend in the downturn in which we now find ourselves?
The Deputy will be aware that I have never been a proponent of that economic theory. Deputy McDowell, who has marked me for the past four and a half years, is well aware of my views which I held long before the EU was making recommendations regarding the Irish position. I have disagreed with that view of economics for well over 20 years. There is nothing unusual about that.
The Deputy asked where the expenditure has gone. It has gone in increased expenditure on health, education, social welfare, infrastructure and many of the other things of which we spoke earlier.
What about the outputs?
I would like the people who say we should cut back public expenditure to write to me, care of Merrion Street, Dublin, telling me the areas of public expenditure where I should cut back. I would appreciate replies by first post next Wednesday morning.