Give Ireland more budget flexibility, Noonan urges euro group

Minister argues for more room for investment spending as finance ministers meet

Euro group president  Jeroen Dijsselbloem and Greece’s finance minister Euclid Tsakalotos  meet ahead of a euro group finance ministers meeting  on Monday. Photograph: Emmanuel Dunand/AFP/Getty Images

Euro group president Jeroen Dijsselbloem and Greece’s finance minister Euclid Tsakalotos meet ahead of a euro group finance ministers meeting on Monday. Photograph: Emmanuel Dunand/AFP/Getty Images

 

Minister for Finance Michael Noonan urged euro-zone finance ministers to grant more budget flexibility to Ireland on Monday as ministers discussed countries’ budgetary plans for 2017 during a euro-group meeting in Brussels.

As ministers considered for the first time last month’s call by the European Commission’s for a fiscal expansion of 0.5 per cent across the euro zone next year, Mr Noonan intervened during Monday’s meeting to argue for more budget flexibility for Ireland.

“We would like more flexibility, within the rules, so that we could have more investment in Ireland, both in social infrastructure and economic infrastructure, and the kind of investment in new industry that takes account of what is coming down the road in the new digital economy,” he said during a break in the proceedings.

Yesterday’s scheduled meeting was overshadowed by the rejection of the Italian referendum on constitutional reform, but euro-zone finance ministers discussed the budget plans of member states, the commission’s proposed “positive fiscal stance” communique issued last month and the latest in the Greek bailout as planned.

More investment

The EU’s executive arm has called for countries to invest more, in a potential sign of a shift in the EU’s economic policy of fiscal consolidation. The measure was widely perceived to be targeting countries with a budgetary surplus like Germany and the Netherlands, though neither country has welcomed the suggestion.

Speaking after the discussion, euro group chairman Jeroen Dijsselbloem, who is also the Dutch finance minister, said ministers had agreed “that some member states can, if they choose to do so, use their favourable budgetary situation to strengthen their domestic demand and growth potential”.

Last week, he told the European Parliament that the EU should focus on implementing budget rules rather than proposing fiscal stimulus.

The euro group signed off on member states’ budgets for 2017, including Ireland’s, during the meeting. Ireland was found to have submitted a budgetary plan for 2017 that was “broadly compliant with the provisions of the Stability and Growth Pact”, the euro group said in a statement.

Mr Noonan said there had been mixed opinions on the idea of fiscal expansion during the meeting.

“There was a general agreement that a mildly expansionary approach without tying it to any specific numbers would be the best way forward. But a lot of people were for the status quo and a lot of people were for very mild expansionary measures in the present circumstances,” he said.

Greek bailout move

In a significant development on the Greek bailout talks, the euro group signed off on short-term debt restructuring measures for Greece, which aim to reduce debt by 20 percentage points of GDP by 2060. The measures, circulated by the European Stability Mechanism, the euro zone’s rescue fund, to ministers, would help smooth out debt repayments in the 2030s and 2040s.

The IMF has insisted on measures to reduce Greece’s debt pile as a condition of the fund’s involvement in the third Greek bailout.

Mr Noonan said that, while Ireland would support debt restructuring for Greece, the concept of a reduction to the nominal debt was not under consideration.

“There are a number of measures on the table like strengthening the maturities and changing the interest rate regime that prevailed up to now, and we can support all those. There’s hardly anyone any more in favour of cutting the nominal debt, because most of the outstanding debt now is official debt; it’s lending by member countries rather than private sector lending, so I don’t think the issue of cuts in nominal debt will be on the table.”