Government sees opportunity amid debate on EU’s fiscal rules

Possible investment in energy projects without breaching budget guidelines

German chancellor Angela Merkel and Taoiseach Enda Kenny meeting earlier this year. They will meet again today.  Photograph: David Sleator

German chancellor Angela Merkel and Taoiseach Enda Kenny meeting earlier this year. They will meet again today. Photograph: David Sleator

Thu, Jul 3, 2014, 01:00

Irish Government officials believe changing Europe’s budget rules could open potential to boost public investment in energy projects without breaching budget deficit guidelines.

This, however, is something which might come into play only in the medium term.

The ultimate attraction for Ireland flows from the high level of energy investment which will be required to meet onerous emissions-cutting targets. In short, the basic argument is that it would be wrong for the Government to be penalised for investing in the long-term productive capacity of the economy if such investment leads to a short-term breach of deficit guidelines.

If it is easy to see why Taoiseach Enda Kenny might find appeal in that, he is hardly in a position to lead the debate in Europe. The bailout may be over, but work remains to be done to achieve control over the public finances.


Although Kenny may express his support for greater investment opportunities when he meets German chancellor Angela Merkel today, the sense remains in Dublin that it is for other leaders to make the running.

There are big implications for Ireland, however. The Taoiseach has made it clear that the Coalition will not shy away from a deficit target of less than 3 per cent in the 2015 budget next October.

Still, strenuous efforts will still be required in successive years to meet further fiscal obligations under the Fiscal Treaty. While this will be a matter of negotiation it goes to show that Ireland’s interest in the debate is not academic.

So is a breakthrough in the offing? It’s far from a done deal. Italian premier Matteo Renzi made a huge play in advance of a summit last week for loosening of the fiscal framework. Yet the fact remains that there was something of a pushback when EU leaders actually met.

There was no actual reference in their summit communiqué to the notion of different treatment for day-to-day expenditure and investment spending. The leaders also made clear their “respect” for the stability and growth pact which governs economic policy in member states.

While this reflects Merkel’s reluctance to fundamentally revise arrangements put in place during the euro zone debt crisis, the leaders still called for the “flexibility” embraced in the pact to be used.

They said an upcoming review of their economic policy programme for 2015-2020 period “will be a good occasion” to focus on job-creation, economic growth and competitiveness.

Competing demands

As incoming chief of the European Commission it will fall to Jean-Claude Juncker of Luxembourg to balance the competing demands for German-style rectitude and Renzi’s push for fiscal loosening.