Pledge to `listen' viewed as mere lipservice

The Minister for Finance, Mr McCreevy, remains adamant that the Commission and EU finance ministers simply do not understand the Irish economy. His course of action, he says, is the right one while the concerns of his EU critics are based on the wrong premise.

Against this background, an obviously shaken Mr McCreevy gave no indication yesterday that he would take serious account of his fellow finance ministers' censure recommendation when framing his next Budget in October. He undertook several times to listen to the Commission but the implication was that he would give its views no more credence than he has done in the past.

This is not the response that other finance ministers and particularly the German government were seeking. Whether the Minister will be able to maintain this line until October remains unclear.

But so far all the indications are that the next budget will be another give-away, unless there is an election in the meantime. And there appears to be little the Commission can do about it.

Economic Affairs Commissioner Mr Pedro Solbes would only say yesterday that the Commission will have to look at the facts rather than listen to talk. "We will have to see the figures," he said.

He has suggested that all the finance ministers should pass their budgets by their peers before unveiling them to their respective domestic audiences. This sort of multilateral surveillance is likely to become an increasing element of monetary union but agreed on it may not be reached any time soon.

And as Mr McCreevy pointed out yesterday, no finance minister would relish the prospect of such external scrutiny.

The other 14 finance ministers appeared simply to listen to Mr McCreevy's robust defence of the Government's economic polices before proceeding to ignore him and issue the unprecedented recommendation.

The Minister also circulated a document comparing Ireland and other EU member-states on a number of criteria from budget surpluses to debt, Government expenditure, growth and unemployment. On almost all counts Ireland came out ahead. However, this did not appear to make any difference to his counterparts.

Some observers believe that Ireland made a tactical mistake in allowing this issue to get to the stage of a formal recommendation. The Commission has been unhappy with Irish budgetary policy for quite some time. There is at least a suggestion that diplomatic moves a number of months ago could have headed this off. However, it is not clear that this is the case.

Certainly Irish officials and EU Commissioner Mr David Byrne did win some watering down of the proposals. Probably the best advice at that stage would have been to welcome this marginal change of heart, and hint that the Commission's concerns would be taken into account while still insisting domestically that the Budget would not be set in Brussels.

Mr McCreevy maintains that the row will not have an impact on other areas of policy but this contention is met with scepticism by most observers. As a small member-state, Ireland depends more on goodwill than many of our partners do. There is little doubt that much of our reservoir in this regard in Europe has evaporated in the last few weeks. If the next Budget does not take our partners' concerns into account, it could also make bilateral relations with the other finance ministers more difficult.

This may have begun in Nice when many of the larger countries and particularly France were angered by our refusal to countenance any form of tax harmonisation. Indeed this forms the backdrop to the current difficulties.

The Minister must now be hoping that the dust will settle on the issue and he will be able to go back to usual business. But he must also be aware that the next Budget will be more closely watched than ever before and could be vital to Ireland's future strategic interests in Europe.