Stephen Collins: Why Ireland shouldn’t push for loosening of Europe’s budget rules

‘If France does not swallow the kind of tough medicine taken by smaller countries there is a danger its economy will slide over the edge’

There is something ominous about the campaign being waged by senior Government Ministers to persuade the European Commission to relax its fiscal rules so that they can spend more than originally envisaged next year.

Of course it is understandable that the Coalition parties want to give something back to voters in the run-up to the election to compensate for years of pain involving tax increases and spending cuts.

The prudent management of the economy over the past four years has itself created some room for manoeuvre, and Minister for Finance Michael Noonan has already indicated that another round of modest reductions in income tax and universal social charge is on the agenda for 2016.

The room for manoeuvre may be greater than expected due to the impressive growth figures and the continuing fall in unemployment. That should generate further revenue to be applied in areas like capital spending which will help sustain the recovery in the long term.

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However, an attempt to wriggle out of EU discipline and overdo the budget giveaway for 2016 could endanger the recovery and backfire politically into the bargain.

Any perception that the recovery is being put at risk for electoral purposes could turn into a damaging political boomerang and reverse the credit the Coalition parties are beginning to get for doing the right thing in difficult circumstances.

The strongest card Fine Gael and Labour have to play in the election is that they had the courage to do what was right in the long-term interests of the country even when it was deeply unpopular.

The outrage and protest being fanned by any array of Opposition sources and much of the media cannot disguise the fact that the tough policies that have been pursued since the onset of the crisis in 2009 are paying off.

The Coalition parties may not like to admit it but one of the main reasons they stuck to the task so assiduously and delivered the recovery was that they were given no choice by the troika.

To be fair to Fine Gael and Labour they quickly got to grips with economic reality after they took office in March 2011 and, in stark contrast to the current Syriza government in Greece, they implemented the bailout programme while negotiating some relaxation at the edges.

This raises the question why Noonan and Tánaiste Joan Burton have in recent weeks tried to piggyback on French backsliding and demand that Ireland should get the same level of flexibility in implementing EU rules.

Fairness

It would have made far more sense for the Government to demand that the French stick to the rules in the interests of fairness and in the long-term interests of the EU.

The perception that the rules which are so rigorously applied in the case of small countries like Ireland, Greece and Portugal do not apply when big countries like France run into problems will undermine EU solidarity in the longer term.

More to the point, if France does not swallow the tough medicine taken by the smaller countries there is a real danger that its economy will slide over the edge and drag the rest of the EU with it.

The Government’s current demand for greater flexibility in meeting EU targets creates the impression that it only did what it did because of outside pressure and would revert back to populist politics as usual if it had the chance.

Surely one of the big lessons from the crash is that the firm and decisive action worked out in discussions between officials in the Department of Finance, officials in Dublin and EU officials in Brussels helped to drag the country back from the edge of economic disaster.

The combination of pressure and assistance from the troika also helped to minimise the political friction within the Coalition.

There is a striking contrast between the way the Fine Gael/Labour coalition of the 1980s took so long to devise a solution due to endless bickering and the good working relations in the current Government which facilitated a decisive response.

Another danger that will arise from attempting to duck out of EU discipline is that it will provide a justification for all the irresponsible forces in politics and outside it who have argued that there was no need for tough measures in the first place.

For the past year or more opinion polls have shown that about half the electorate is so disgruntled by six years of belt-tightening that it is prepared to vote for an array of forces outside the political mainstream.

Mood of hostility

The mood of hostility to established political parties is currently sweeping across the democratic world and is not confined to Ireland. This is nothing new and has happened before during times of uncertainty.

Nor is it confined to countries like Ireland, Greece and Spain that have borne the brunt of the crisis. It is also evident in the rise of the xenophobic right in countries like France and Britain, where anti-EU and anti-immigrant sentiment are on the rise.

In Ireland anti-establishment populism takes a variety of forms – right, left and centre. Naturally that has put the wind up the established parties which have governed the State in one combination or another since its foundation.

However, with the recovery taking a firm hold now is not the time to panic.

Instead, Fine Gael, Labour and Fianna Fáil need to take the fight to their opponents and defend their records as robustly as possible.