Paul Kehoe
Question:19 Mr. Kehoe asked the Minister for Finance his views on relaxation in the terms of the stability pact and if he will make a statement on the matter.
Written Answers - Fiscal Policy.
In its programme, the Government reaffirmed that the Stability and Growth Pact provides the overall framework for Ireland's budgetary policy. The essential message of the Stability and Growth Pact is that, through fiscal prudence, we can ensure economic growrth and fiscal stability. At the recent spring European Council meeting in Brussels in March, Heads of State and Government approved a report from the ECOFIN Council on strengthening co-ordination of budgetary policies. The report stated that there is no need to change either the Treaty or the Stability and Growth Pact, nor to introduce new budgetary objectives or rules. However, the report made some recommendations regarding the effective application of the stability and growth pact. The main recommendations in this regard included the following: first, that the economic cycle should be taken into account when assessing compliance; second, countries with deficits exceeding the close to balance or surplus requirement must improve their budgetary position by an annual minimum of 0.5% of GDP; third, member states should avoid pro-cyclical policies; and fourth, greater attention will be paid to analysing the long-term sustainability of public finances and greater emphasis will be placed on reducing debt levels and the quality of public finances. I believe that the discipline of the Stability and Growth Pact has been good for Europe and for Ireland. We are not following these policies simply because of EU rules, but because they make good sense in themselves.