Fiscal Policy

Dáil Éireann Debate, Tuesday - 5 November 2013

Tuesday, 5 November 2013

Questions (157)

Michael McGrath

Question:

157. Deputy Michael McGrath asked the Minister for Finance the timeline envisaged for the rapid progress towards achieving our medium-term budgetary objective referred to in the 2014 economic and fiscal outlook; and if he will make a statement on the matter. [45865/13]

Written answers

Minister for Finance

Once Ireland reduces its deficit below 3% of GDP in 2015, the Excessive Deficit Procedure to which we have been subject since April 2009 will be abrogated (lifted) and we will no longer be subject to the corrective arm of the Stability and Growth Pact (SGP). Thereafter, however, we will be subject to the preventive arm of the SGP, which requires that we converge towards our country-specific medium-term objective (MTO). Article 3(1)b of the Treaty on Stability Coordination and Governance in EMU (TSCG or Fiscal Compact), stipulates we must 'ensure rapid convergence towards our MTO'. In line with Article 3(2) of the Treaty on Stability Coordination and Governance in EMU (TSCG or Fiscal Compact), the European Commission has prepared a 'calendar of convergence' towards Member States’ MTOs. On this basis, the Commission foresees that Ireland will reach its MTO of a balanced structural budgetary position (net of impact of the economic cycle and temporary one-off factors) by 2018.

Under the preventive arm, we are required to make structural correction of at least 0.5% of GDP per annum from 2016 onwards. On the basis of Budget 2014 arithmetic, Ireland is projected to comply with this, despite no further consolidation assumed in the fiscal arithmetic.

The European Commission will judge progress towards our MTO on the basis of making 'sufficient progress' in structural terms, including with an assessment of compliance with the so-called 'expenditure benchmark' as outlined in the 'Six Pack'. By constraining net expenditure growth below the medium-term reference rate of potential output, this can deliver an improvement in the structural balance without the need for recourse to further expenditure cuts or revenue increases.