Dáil Éireann Debate, Tuesday - 9 November 2021
106. Deputy Pearse Doherty asked the Minister for Finance if he has or will make a submission to the relaunched review of EU economic governance in particular with regard to fundamental reform of the Stability and Growth Pact; and if so, the reforms he and the Government will argue in favour of. [54425/21]
View answerAs the Deputy is aware, the European Commission published a Communication on October 19th which formally relaunched the public debate on the EU economic governance framework. Let me state at the outset that I welcome the Commission’s communication, as I believe that the timing is right for Europe to consider, and to debate, the future of our fiscal framework.
The discussions on reform of the framework will be challenging, with a wide diversity of views across Member States. While these discussions will of course involve all 27 EU countries, as President of the Eurogroup, I will be working to try and find consensus on a way forward among euro area Member States. I am, therefore, conscious of the need to listen to and reflect the diversity of views across euro area countries.
Of course, as Ireland’s Minister for Finance, I also have a national role and, on this basis, it is my intention that a submission be made to the Commission’s public consultation on the future of the EU economic governance framework.
In framing our submission, I am conscious that the upcoming discussions will take place against the backdrop of a number of fiscal challenges. The most immediate of these is the challenge posed by the impact of the Covid-19 pandemic on the public finances of EU Member States. Strong coordinated policy actions at EU and national levels (including the activation of the General Escape Clause of the Stability and Growth Pact) helped to reduce the societal and economic impact of the pandemic. While these measures were undoubtedly necessary and prudent, they have nevertheless resulted in significant increases in deficit and debt ratios throughout the EU.
Furthermore, a number of more medium-term fiscal and structural challenges were already visible on the horizon before the pandemic hit. Amongst these are the challenges posed by the so-called ‘dual transitions’ to a digital and green economy. Concurrently, population ageing over the coming decades will also have a significant impact on the public finances.
The structural budgetary challenges we are now facing, along with the economic interdependencies and risks which existed when the European Monetary Union was established, all speak to the continued need for fiscal rules at a European level. However, such rules must be appropriately calibrated in order to remain credible. The rules must also contain a degree of flexibility, to allow Governments to tackle unanticipated shocks such as the Covid-19 pandemic. Finally, any reformed fiscal framework must be able to accommodate the very significant public investment which will be needed to facilitate the dual transitions in a manner that ensures the sustainability of Member States’ public finances.
Ultimately, effective economic and budgetary coordination remains a key building block for ensuring stability and growth in the EU and for strengthening the Economic and Monetary Union. Maintaining the sustainability of public finances as an objective of the fiscal rules is essential in this respect.
