As the Deputy will be aware, the European Commission published a Communication in October 2021 which relaunched the review of the economic governance framework. I have strongly welcomed the re-opening of the Commission’s review.
Discussions on the future of the European fiscal framework have been ongoing at the relevant EU sub-committees since the relaunch of the review. These discussions have been grouped around four main themes: 1) fiscal sustainability, 2) encouraging investment, 3) encouraging counter-cyclical fiscal policy/stabilisation and 4) improving governance and compliance.
The Commission has stated that it will provide orientations on possible changes to the economic governance framework with the objective of achieving a broad-based consensus on the way forward ‘well in time’ for 2023. In terms of discussions regarding specific reforms, the Commission has yet to bring forward any detailed proposals. However, Ireland supports reforms that improve the transparency and predictability of the rules.
In regards to the recommendation of the Oireachtas Budgetary Oversight Committee report, I am firmly of the view that investment in the productive capacity of our economy is key to our future prospects. In particular, robust public capital investment will be needed to achieve our ambitions in the context of the green and digital transitions, as well as meeting the Government’s housing targets.
In this context, it is important to note that the current EU fiscal framework does not place any limits on public investment, as additional expenditure is always possible provided it is financed by revenue-raising measures or matched by offsetting reductions in current expenditure. That being said, we must also recognise that, prior to the pandemic, there was already evidence of an investment gap across Europe. The role of the EU fiscal framework in tackling this investment gap is a complex question but one which I believe we must consider at both a national and European level, particularly in the context of the EU’s long-term strategy to move to an economy with net-zero greenhouse gas emissions by 2050.
My officials and I will continue to actively engage in these discussions with our European partners, but it must be recognised that there are difficult trade-offs involved. This means that finding agreement from all Member States will be challenging.
