Burton lobbies for relaxation of EU rules on spending

The Coalition has started a major lobbying campaign urging the European Commission to ease back on rigid fiscal rules which would limit the scope for a generous October budget.

In a key speech to be delivered in Boston College in the United States tonight Tánaiste Joan Burton will argue that Ireland should be entitled to spend surplus exchequer revenue coming on the back of strong economic growth this year.

She will say the Coalition should be allowed spend it on jobs, infrastructure, education and tax cuts rather than have it earmarked for debt reduction, as is required under the strict fiscal rules.

But she has insisted there will be no “splurge”.

Ms Burton will call on the commission to show "flexibility" to Ireland in Budget 2015, which will be the last budget before the general election.

Her call will echo similar calls made by Minister for Finance Michael Noonan last week, although she will make a stronger and more direct case for increased spending scope.

The two contributions, which seem to be co-ordinated, are a strong pointer to a deliberate strategy to convince the commission to extend the same flexibility to Ireland as was given to France, which has struggled to meet its fiscal targets.

Budget

The October budget will be a crucial determinant of next year’s general election. Ministers believe that meaningful and tangible increases in spending on key services – as well as reductions in taxes – will be needed to bolster its argument that the economy is in recovery and the era of austerity is coming to an end.

The Labour Party leader will say the early figures for this year on the economy suggest a strong performance which will put the Government in a much better than expected position when it frames its budget in October.

“If that is the case, I believe the Government should have all possible options open to it,” Ms Burton will say. “We should not be constrained from essential investment by a narrow or rigid interpretation of fiscal rules on the part of the European Commission.”

Ireland has the fastest growing economy in the EU but strict EU budgetary rules put an emphasis on continued deficit reduction, even when the deficit target of 3 per cent of gross domestic product has been reached. The rules put strict limits on government spending even when it has surpassed its fiscal targets.

Investing

Ms Burton will say that if Ireland can afford to invest money, then it should. “If we can afford to alleviate some of the pain caused by the recession, we should. If we can afford to put more money in the pockets of our people, we should. If we can afford to improve public services, we should.

“There will be no splurge.”

Ms Burton has said the Government will do nothing to put the economy at risk.

This strong assertion by the Labour leader following similar comments by Mr Noonan is an indication the Government has set about a concerted lobbying campaign of the commission to exercise flexibility. The Coalition is certain to use the experience of France, and the latitude it was shown, as having set a precedent.

The seriousness this matter is given by Government is illustrated by Mr Noonan having raised the issue with German finance minister Wolfgang Schäuble and the commission during two days of meetings in Brussels last week.

In particular Mr Noonan honed in on the way growth is calculated for the purposes of the fiscal rules.

It does so on a 10-year average, which has resulted in a figure of 0.6 per cent, well below the economy’s current growth rate of 3.5 per cent.