Troika to return to Ireland as part of post-bailout review

EC declines to comment on claims Ireland’s budget may be in breach of EU rules

 

Representatives from the Troika will travel to Dublin next month as part of the fourth post-bailout review of the Irish economy, as controversy over Ireland’s compliance with EU stability and growth pact rules emerged.

The European Commission declined to comment on claims Ireland’s budget may be in breach of EU debt and deficit targets, following suggestions by the head of the Fiscal Advisory Council, John McHale, that Ireland’s budget was too expansionary and could be in breach of EU rules under the Stability and Growth Pact.

Mr McHale later retracted his suggestion that a 1 per cent cut in the structural deficit was required by Brussels, which would have put Ireland in breach of the EU deficit targets.

A European Commission spokeswoman said the commission would not comment on the Irish budget until the draft budgetary plan had been assessed.

The Department of Finance is due to submit the budget to the European Commission on Thursday. It is understood details of the budget announced on Tuesday will be discussed during next month’s post-programme visit by the troika, with the commission due to deliver its final verdict at a special meeting of euro zone finance ministers on November 23rd in Brussels.

Officials from the European Commission, European Central Bank and IMF are expected to meet senior representatives from the Department of Finance and central bank during their week-long visit to Dublin beginning on November 9th.

Under the terms of Ireland’s three year bailout programme which ended in December 2013, the country is subject to two post-programme surveillance visits each year by the troika until 75 per cent of the bailout loans are repaid, a process that could take decades.

Under the so-called “six pack” and “two pack” rules introduced in the wake of the financial crisis, euro zone member states are obliged to submit their national budgets to Brussels by October 15th each year for scrutiny and to adhere to strict fiscal targets. This includes a requirement to maintain a budget deficit of less than 3 per cent of GDP, and a public debt level of under 60 per cent of GDP subject to certain conditions.

In terms of Ireland’s specific requirements, the European Commission’s country-specific recommendations for Ireland state the Government is required to improve the structural balance by 0.6 per cent of GDP next year, a target that is included in the budget plan announced on Tuesday by Minister for Finance Michael Noonan.

In a surprise move last week, EU economics commissioner Pierre Moscovici criticised Spain’s draft budgetary plan which had been submitted early to the European Commission due to the December general election in Spain.

The EU’s economic chief warned that Spain was in breach of budget targets, provoking a furious response from Madrid, with the Spanish budget minister criticising the European Commission’s “fixation” with budget deficit targets.

EU commissioner Moscovici and Commissioner for the Euro Valdis Dombrovskis reiterated this week that Spain’s budget for next year should be revised. “The Commission is of the opinion that Spain’s draft budgetary plan is at risk of noncompliance with the provisions of the Stability and Growth Pact,” Mr Moscovici said on Monday.

The European Commission is also due to update finance ministers next month on whether expenditure by member states on tackling the refugee crisis and relocating refugees across the bloc should be excluded from EU spending rules.

It follows calls from a number of countries, led by Austria, that the European Commission relax its budget targets in the wake of the unforeseen costs incurred by member states in tackling the refugee crisis which may impact on public expenditure targets for 2016.