Berlin's MPs shrug off controversy over budget information

LEAKED DOCUMENTS:Scrutiny of finance plans deemed to be a 'day-to day reality' for a country in receipt of funds from EFSF

GERMAN MPs have expressed surprise at the controversy in Ireland over budget information being given to the Bundestag before the Dáil.

On Wednesday, Berlin’s federal finance ministry forwarded the latest quarterly troika documents, including a letter of intent from Minister for Finance Michael Noonan, to the Bundestag budgetary committee.

This procedure is in line with German guidelines for participation in the EFSF bailout fund. To release Germany’s contribution to each EFSF tranche, the federal finance ministry has first to secure the approval of the 41-member committee.

Surprise in Berlin at the reaction in Dublin was tempered by a reluctance by officials to go on the record for fear, as one member put it, “of remarks being misconstrued”.

“What’s happened is the federal government meeting its legal information to inform the Bundestag about the EFSF,” said one committee member from the ruling Christian Democratic Union (CDU). “This is widely known and seems unproblematic from our perspective. This is the day-to-day reality of a programme country.”

Another committee member added: “We realise that it’s taken a while for this reality to hit in Ireland. But there are some programme countries in the euro zone that aren’t even this far.”

In a letter of intent, seen by The Irish Times, the Minister for Finance Michael Noonan promises to increase the top VAT rate by two points in the 2012 budget to 23 per cent, raising €670 million for the exchequer.

Minister for Public Expenditure Brendan Howlin said on RTÉ yesterday that “the notion that anything has been decided is untrue”.

A senior member of the Bundestag budgetary committee, when asked if any programme country had not implemented a measure as laid out in a letter of intent, said: “No, that hasn’t happened, and would be counterproductive.”

The federal government in Berlin played down the significance of the documents yesterday.

Acknowledging that national budgetary policy is a sensitive matter, Berlin pointed out that opening budgetary policy to outside scrutiny was the central condition and “day-to-day reality” of the bailout programme.

All EU member states have agreed to a new “European Semester” of budgetary oversight by Brussels from next year.

“This is the shape of things to come.

“We’re going to have to talk a lot more to each other about our budget process, that’s a lesson of the crisis,” said a German government official.

“There’s no rule that you have to give German MPs information before your own.”

Two days ago, finance ministry state secretary Steffen Kampeter sent the latest troika documents, dated November 11th, to the heads of the Bundestag budgetary committee, which were forwarded to all 41 members.

“The commission comes to the conclusion that programme implementation in Ireland continues to be on track,” writes Mr Kampeter in a cover letter. “Important progress has been reached, in particular in the financial sector and in the implementation of growth-oriented structure.

“The programme’s fiscal targets have even been over fulfilled.”

In his summary, Mr Kampeter warns that the “the market trust won back by Ireland is, however, still fragile”.

“A possible risk to stability is seen in external risks, such as an economic cool-off in Europe. To prevent further uncertainty in markets, Ireland has to continue consequentially down the austerity and reform path.”

“Against the backdrop of the successful implementation of the programme in the third quarter 2011 the federal government is in favour of the payment of the fourth credit tranche to Ireland.”

Summarising the troika report, Mr Kampeter writes: “The risks Ireland faces are external in nature.

“Ireland’s strength, a competitive export sector, is linked to a high dependence on external demand.”

In addition to this cover letter, German budget committee MPs were given the full troika report, a 40-page document issued by the European Commission’s directorate general for economic and financial affairs, dated October 28th.

In addition, they received four “confidential draft programme documents” including letters of intent from the Department of Finance to the EU authorities and the IMF, a memorandum of economic and financial policies and a “third update of the memorandum of specific economic policy conditionality”.

All of the documents were provided both in the Commission’s original English version and in German translation.

The letter of intent from Mr Noonan ends: “We authorise the IMF and the European Commission to publish the letter of intent and its attachments, and the related staff report.”