Tuesday 25 October 2016

Europe may let us loosen the purse strings

Published 23/01/2016 | 02:30

The Department of Finance in Dublin. Photo: Aidan Crawley/Bloomberg
The Department of Finance in Dublin. Photo: Aidan Crawley/Bloomberg

The next government may be able to spend more than expected in the coming years because the European Commission is likely to adopt slightly less stringent budgetary rules, the Department of Finance has said.

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This could free up an extra €1bn-€1.5bn between 2017 and 2021, the Department said.

Budget 2016 sets out the amount of so-called fiscal space available up to 2021, and forecasts that around half a billion euro would be available to the new government for Budget 2017, rising to €1.1bn in 2018 and €1.3bn the following year.

The amount of fiscal space available is in part determined by rules from Europe, namely the Medium Term Budgetary Objective (MTO), effectively a budegetary target designed to keep governments on track towards meeting commitments to pursue sound fiscal policies.

The Department of Finance said the European Commission is updating the minimum MTOs and will be holding discussions at a technical level with member states at the end of this month.

"Given the decline in the Irish debt ratio, and other factors, it is likely that the MTO proposed by the Commission for Ireland might be slightly less stringent than was previously the case," the Department said.

"Officials in the Department have estimated that a structural deficit of -0.5pc of GDP… is more likely, but this is subject to the outcome of the technical discussions."

Irish Independent

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