THE EUROPEAN Commission has rejected calls for the 2014 deadline for getting the Irish public finances under control to be extended by two years.
The chief spokesman for EU economics commissioner Olli Rehn said last night only the European Council could change the 2014 target confirmed recently by the Government.
He was commenting after the Economic and Social Research Institute (ESRI) endorsed the suggestion from the general secretary of the Irish Congress of Trade Unions, David Begg, that the Government should extend to 2016 the period over which it attempts to reduce the deficit.
The institute said it had “grave doubts over the wisdom” of the strategy which aims to reduce most of the deficit by 2014 as it posed a risk of “overkill”.
Mr Rehn’s spokesman, however, pointed out the Government’s policy commitments were made “before its European partners” and could only be changed by agreement with them at a European Council meeting.
“The Irish Government has confirmed as of the end of September its commitment to achieving the 3 per cent per target in 2014,” he said.
Minister for Finance Brian Lenihan said yesterday the Government could get an extension of the 2014 deadline “after a few years”, but only if it showed a credible four-year plan now. Seeking an extension of the deadline beyond 2014 now would be “devoid of any credibility”.
Last night, the Government and the two main Opposition parties reaffirmed their commitment to meeting the 2014 deadline after a 2¼-hour meeting of the party leaders.
In its quarterly economic forecast published today, the ESRI acknowledges that changing the current timeframe is “highly” unlikely and that the Government has very little room for manoeuvre, but it says moving the time horizon from 2014 to 2016 would be seen as credible by international lenders.
One of the authors of the report, Dr Alan Barrett, told a press briefing yesterday “it is very hard to see the Croke Park deal surviving”.
That deal, agreed between the Government and public sector trade unions, excludes further pay cuts and compulsory redundancies for public sector employees. The ESRI report questions whether either of these commitments can be maintained and says the issue of pay might have to be “re-opened”.
Dr Barrett said the strategy of depending on natural wastage to reduce the number of people employed in the public sector was not efficient as it made no account of productivity.
The institute also states that last year’s report for the Government by economist Colm McCarthy, known as “An Bord Snip Nua”, may have to be re-examined to consider more fundamental cuts to public sector spending and employee numbers.
The ESRI has become more pessimistic in its analysis over the past three months, stating “a range of severe difficulties still face the economy and, in the case of at least one, Ireland’s capacity to borrow on international markets, difficulties have become more acute”. Reflecting this, it has cut its economic growth forecasts for both this year and next.
In 2010, it expects gross domestic product (GDP) to contract by 0.25 per cent. Three months ago, it expected the economy to expand by that amount.
For 2011, it expects the economy to grow 2.25 per cent, the first annual expansion since 2007. However, this forecast has been revised down by half a percentage point since July.
Taoiseach Brian Cowen, John Gormley, Enda Kenny and Eamon Gilmore met yesterday evening to discuss the state of the public finances.
The Taoiseach said later he had indicated his view it would be in the national interest that there be clarity about the country’s determination to restore fiscal stability.
“The party leaders reaffirmed their commitment to addressing the deficit in the public finances with a view to reducing it to 3 per cent of GDP by 2014,” said Mr Cowen.
He said the party leaders had also welcomed the proposal that there should be a debate on the economy in the Dáil next week, and said the Department of Finance would remain available to continue its briefing of the Opposition parties and to cost any proposals they put forward.
Fine Gael leader Enda Kenny also welcomed agreement on the 2014 deadline and the Dáil debate, but said the country needed a recovery plan and not just an austerity plan.
He said the effort at finding consensus had come to an end and there would be no further meetings on the matter between party leaders.
Labour Party leader Eamon Gilmore also reaffirmed the 2014 deadline but, like Mr Kenny, said the talks process was now over. Green Party leader John Gormley accepted the consensus approach would not be continued.