EU sets out rules for any changes to plan

 

REVIEW:THE FOUR-year plan will be reviewed every year but adjustments which cut expenditure savings or tax yields must be accompanied by measures to make up an equivalent amount elsewhere, the EU Commission has said.

Although the spokesman for economics commissioner Olli Rehn said the provision for an annual review meant elements of the plan were “not set in stone”, he added that only European finance ministers had the power to change the 2014 deadline for the achievement of a 3 per cent budget deficit.

This means that any incoming government may have scope to put their own stamp on the plan next year but not to change the fiscal parameters in which it operates.

The plan, published on Wednesday by the Government, will be the “cornerstone” of its three-year bailout agreement with the European authorities and the IMF. The commission has given a cautious welcome to the plan but described it as the “starting point” and not the “finishing point” of talks on the rescue package. Emergency loans worth some € 85 billion are under discussion.

“Any measure that changes the plan has budgetary consequences, it has to be recalculated,” Mr Rehn’s spokesman said.

In their statement on Ireland last Sunday, EU finance ministers made it clear that the four-year plan will be subject to an annual review. While this allows scope for further cuts and tax measures to be sought if economic conditions deteriorate, or if the desired results are not achieved, it also gives any new government a say over some of the policies enshrined in the plan.

EU employment commissioner Lazlo Andor said yesterday that the Irish authorities should look beyond corporation tax in the drive to stimulate employment.

“I think every government will have to see what is the right balance for the sources of competitiveness and what we would like to see – as opposed to other factors . . . [and also] to appreciate the need to invest in human resources and make this a key source of economic competitiveness as opposed to other sources,” he said.

“That applies to Ireland as well because Ireland has been quite specific in putting great emphasis on taxation and using tax rates as a competitive factor. It seems the crisis calls for a reassessment of this strategy.”