State unlikely to join Commission recovery plan

Ireland is unlikely to join a €200 billion economic recovery plan unveiled by the European Commission, the Department of Finance indicated this afternoon.

The commission plan aims to stimulate spending and boost consumer confidence by injecting purchasing power. The commission president José Manuel Barroso said the plan was "timely, temporary and targeted".

Member states are expected to contribute €170 billion while the European Union will give €30 billion. While welcoming the Commission's move - saying it will boost demand - the Department said the State has "no room for manoeuvre in terms of a further fiscal stimulus".

This is because next year's general Government deficit is budgeted to be 6 per cent. Under existing spending plans the State's capital investment will increase to 5 per cent of GNP, which the Department says is almost twice the EU average.

This coupled with "relatively low tax rates for the employed" are broadly consistent with the commission recovery plan, the Department suggested.

The priority for countries like Ireland, with relatively high general government deficits, is to get the public finances back in order, it indicated.

A spokesman said not all member states have a similar capacity to provide their economies with a further financial boost by relaxing their finances.

He said the Government would be given time to reduce its deficit below 3 per cent and said this must be achieved or face having the State's commitment to maintaining credible public finances called into question.

The commission plan will need to be approved at the next EU summit on December 11th and 12th. The majority of the package will be implemented in 2009, while some measures would continue into 2010.