The European Commission has responded to the debate on the Growth and Stability Pact rules with a set of proposals which steer a course between preserving strict budget deficit limits and allowing more flexibility on expenditure for states with low indebtedness.
More account would be taken of how budgets are balanced and managed over the economic cycle.
This is a limited package compared to what will be required to adapt the pact to new economic circumstances, including the successful launch of the euro. But it moves in the right direction, by introducing more flexibility to the system. Accordingly it is likely to be accepted by the Council of Ministers, despite the differential impact on individual member-states. They have already committed themselves to a common discipline in which they must take account of the euro zone's interests as a whole, as well as their own budgetary arithmetic.
According to these proposals there would be no extra leeway for states such as Germany, France and Portugal whose budgetary deficits are approaching the existing 3 per cent limit - nor for those like Italy, which is near the 60 per cent limit on state indebtedness. But for Ireland these proposals do open up options, as the Government makes final preparations for next week's Budget. The Irish rate of debt to gross national product is 35 per cent, one of the lowest in the EU. It would be open to the Government to borrow for longer term infrastructural projects, rather than insisting on close budgetary balances.
There are strong reasons for it to do so. Ireland's infrastructural deficit is in increasingly glaring contradiction with the rapid growth of incomes and expectations. The resulting congestion is becoming the principal barrier to preparing for another phase of economic development. It makes little economic sense to delay expenditure on roads, public transport and schools, for example, which are planned on a multi-annual cycle, merely to solve an immediate problem of budgetary balances. Strategic borrowing, if it allowed such projects to proceed on time and, crucially, in a manner which is cost efficient, is a more intelligent approach.
Mr McCreevy has correctly insisted on the need to control expenditure and get better value for taxpayers' money - all the more so since he presided over such a lax system of controls in the last three years. But that necessary task must proceed along with ensuring the infrastructure deficit is tackled with the urgency it deserves.