Dáil Éireann Debate, Tuesday - 25 January 2022
243. Deputy Mairéad Farrell asked the Minister for Finance the position of Ireland for the reform of the EU economic governance framework; his proposals for same; and if he will make a statement on the matter. [3138/22]
View answerAs the Deputy will be aware, the European Commission published a Communication in October 2021 which relaunched the review of the economic governance framework. I strongly welcome the re-opening of the Commission’s review, as I believe now is the right time to discuss possible reforms to the existing fiscal framework in Europe.
To date, the Commission has not brought forward any specific proposals for reforms to the governance framework. However, as I have re-iterated on several occasions, I support efforts to increase the transparency and predictability of the framework.
The discussions on reform of the framework will be complex and 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. In this context, I recognise that a balance must be met between the need to finance additional investment requirements and the equally important need to ensure financial sustainability, particularly given the impact of the pandemic on the fiscal positions of Member States.
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 be credible. The rules must also contain a degree of flexibility, to allow Governments to tackle unanticipated shocks such as the Covid-19 pandemic.
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.
