Noonan seeking ‘more sensible application’ of EU fiscal rules

Theoretical and "bizarre" interpretations of economic data cannot be used to apply EU budgetary rules, Minister for Finance Michael Noonan has told the Dáil.

The Minister said he was “seeking a more sensible application” of the revised EU fiscal rules in discussions with EU colleagues.

The benchmark links growth in spending to the potential growth of the economy.

The Minister told Sinn Féin finance spokesman Pearse Doherty the current reference rate was based on a 10-year average potential growth, updated every three years, but the rate for Ireland for 2014 to 2016 was calculated in 2013, when "outlook for our economy's growth potential was considerably weaker".

‘Outdated estimates’

The use of “such outdated estimates could lead to inappropriate fiscal decisions being made”.

But Mr Doherty said the Minister “was one of the architects of the rules and the first time they apply to this country is now, and we are over with the begging bowl asking to get rid of some rules that are simply not sensible”.

He said there was a “suspicion that this is happening as a result of it being an election year”.

Austerity rules

The Government had implemented all the austerity rules but because of the election and the commitment to cut taxes for top earners, extra spending would not be allowed under current rules.

Defending his approach however, Mr Noonan said he and the Government “believe in the rules that stem from the Stability and Growth Pact”.

When rules “are applied to give bizarre or peculiar results, the application of the rules needs to be examined”, he said.

In 2008, “technical people” in the European Commission looked at migration patterns for three years or so when migration was very strong.

He said they “came to the conclusion that the Irish population would decline by a million by 2030, and built expenditure loans around that. That is nonsense. It is not going to happen and it is quite clear that population trends now negate that.

“Some kind of theoretical, bizarre interpretation of economic data cannot be the base for applying the rules,” he insisted.