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Stability and Growth Pact

Dáil Éireann Debate, Tuesday - 9 June 2015

Tuesday, 9 June 2015

Questions (348)

Billy Timmins

Question:

348. Deputy Billy Timmins asked the Minister for Finance his views on the comments of the Irish Fiscal Advisory Council on the Government's spring statement and stability programme update submission to the European Union Commission; and if he will make a statement on the matter. [22454/15]

View answer

Written answers

The Fiscal Assessment Report published by the Council last week, the eighth such report since its inception in 2011, is being considered by my officials.

As with all their reports to date, the Fiscal Council has asserted its independence and produced some interesting pieces of analysis, not all of which I agree with.  As is normal, a comprehensive response to all of the pertinent issues will be published in due course. I will however, give my initial views on the most significant issue raised by the Council. 

The Fiscal Council stated that the fiscal projections contained in the Stability Programme Update did not show Ireland complying with our requirements under the Stability & Growth Pact, ie. the improvement in our structural balance was not the required minimum. 

It is important to note that the European Commission will judge compliance with the fiscal rules on the basis of two assessments. First is the minimum annual improvement in the structural balance and the second is compliance with the expenditure benchmark. The minimum improvement in the structural balance and the expenditure benchmark are designed to be complementary.

The fact that the estimated structural improvement was less than required was explicitly addressed in the Spring Economic Statement. Indeed, based on my Department's estimates at that point in time, compliance with one assessment, the expenditure benchmark, results in not meeting the other assessment, the annual improvement in the structural balance. This somewhat counter intuitive outcome emphasises the material problems posed by some of the technical aspects the rules can generate. 

While on the basis of the forecasts contained in the SES, Ireland is not projected to meet the minimum structural adjustment required under the preventive arm of the SGP, in general, Commission assessments of the fiscal stance have taken a pragmatic approach to some of these country specific aberrations and it is not expected to be a substantive issue for Ireland.

It should also be noted that the assessment of the SPU by Commission staff found that, assuming execution of the fiscal measures set out in the SPU, the outlook for 2016 is indeed compliant with the structural pillar under the Budgetary Rule. 

While I will address other issues comprehensively in my formal response to the Council, I would strongly make the point that when formulating Budget 2016, the Government are acutely aware of the importance of adhering to the fiscal rules and our fiscal policy will reflect this.

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