Dáil Éireann díospóireacht -
Thursday, 25 Feb 1999

Vol. 501 No. 2

Written Answers. - Fiscal Policy.

Bernard J. Durkan

Ceist:

45 Mr. Durkan asked the Minister for Finance the extent and manner to which he proposes to influence EU policy on fiscal matters with particular reference to the need to ensure continued economic growth and curbed inflation; if Irish economic fundamentals continue in accord with these norms; and if he will make a statement on the matter. [5465/99]

Bernard J. Durkan

Ceist:

269 Mr. Durkan asked the Minister for Finance the plans, if any, he has to make submissions at ECOFIN meetings with the objective of ensuring continued growth throughout the EU; and if he will make a statement on the matter. [5715/99]

Minister for Finance (Mr. McCreevy)

I propose to take Questions Nos. 45 and 269 together.

Maintaining economic growth and promoting employment are the main objectives of economic policy in Europe. The appropriate economic policy mix in Europe, including budgetary policy, was set out in the broad economic policy guidelines agreed at the Cardiff European Council and is discussed on a regular basis at both ECOFIN and Euro 11 meetings in which I participate.

The stability and growth pact outlines the parameters for the conduct of fiscal policy in Economic and Monetary Union. This stipulates that member states must keep their budgetary positions at close to balance or in surplus in normal economic conditions. The objective of the pact is to ensure that member states have the necessary leeway to avoid an excessive deficit in the event of an economic slowdown.

Implementation of the stability and growth pact is a key element of this economic strategy. Further fiscal consolidation is required to support the policy goals of the ECB. However, macroeconomic policy is just one element of economic policy at EU level. It is widely recognised that structural reform is required if unemployment is to be significantly reduced. Arising from the Cardiff European Council, reform of product, capital and labour markets is now a top priority. Improving the efficiency of markets will enhance competitiveness and promote employment.

As regards budgetary policy in Ireland, in my December budget I provided once again for significant general Government surpluses out to 2001 and for further – reductions in the Government debt/GDP ratio. This prudent approach to budgetary policy will support the continuation of low inflation in Ireland. In accordance with the stability and growth pact, Ireland's stability programme was submitted to the European Commission in conjunction with the 1999 budget. The programme outlined our medium term economic and budgetary projections and policies.

At January's ECOFIN it was concluded that Ireland's budgetary policy complied with the stability and growth pact. The Council opinion also acknowledged the excellent supply side performance of the economy in recent years. It is this performance which has enabled us to combine strong growth with moderate inflation.