EU chief warns Ireland on need to reduce public debt

European Commission vice-president Jyrki Katainen has warned the Government it must continue with structural reforms and fiscal consolidation despite the country's strong economic performance.

Speaking to The Irish Times ahead of a two-day visit to Dublin and Belfast which begins today, the EU commissioner with responsibility for jobs, growth, investment and competitiveness said it was vital that Ireland continued to reform the country and reduce public debt, particularly when the economic climate was benign.

“We recommend Ireland to continue the reforms...and also to continue fiscal consolidation because now Ireland is in good economic times. It’s easier to consolidate the budget now than in bad economic times.”

More difficult

He said when growth is close to zero and unemployment is high it is naturally “more difficult to consolidate the budget”.

“In order to build a strong ground to the future it makes sense to continue reforming the country and also reducing the public debt.”

The European Commission has criticised the Government’s budget plans for this year and next as outlined in last month’s Spring Economic Statement, calling for a more “ambitious budgetary target” for 2016.

With Ireland still nursing the fourth highest debt to GDP ratio in the EU, the commission is keen for Ireland to use recent economic gains to pay down debt rather than increase spending.

Officials in Brussels are also concerned at the rapid pace of economic growth in the country, which is now the fastest growing economy in the EU with growth of 3.5 per cent.

Mr Katainen – who was one of the most stringent proponents of austerity while prime minister of Finland and took a tough stance on Ireland throughout the bailout – applauded Ireland’s economic turnaround.

“I want to congratulate people in Ireland very much. You have solved your own problems. I hope that Irish people, as much as people have suffered, appreciate that as a nation you have shown courage and decisiveness to solve your own problems.”

While declining to comment specifically on the ongoing public sector pay talks, he said cuts to public sector salaries had been vital during the crisis, and important for Ireland’s competitiveness.

Everyday lives

”It is very understandable that people whose salaries have been cut feel it’s very unfair. It doesn’t really help to say, look at the macroeconomic figures, because people are using the money to live their everyday lives.

“Nevertheless putting things in context I’m sure that Irish people also understand that the situation was extremely severe and that corrective measures needed to be done, and now those measures really bear fruit.”

Privately, the European Commission has raised concerns at official level that pay rises for public service staff could spill over into greater demands for increases in the private sector.

Mr Katainen will this evening meet Taoiseach Enda Kenny, whom he knows personally as a fellow member of the centre-right European People's Party (EPP), and will hold talks with Minister for Finance Michael Noonan and Minister for Public Expenditure and Reform Brendan Howlin tomorrow morning in Government Buildings.

The commissioner is in Dublin to promote the European Commission’s €315 billion investment plan launched late last year.

The aim of the “Juncker plan” is to stimulate investment across Europe by leveraging private sector funding.