Explainer: Why the Troika is back in town
Published 09/11/2015 | 10:51
The EU/ECB/IMF Troika is back in town this week while a decision will be taken later this month as to whether the recent budgets of European countries meet fiscal rules.
Legislation, introduced in light of the European debt crisis, is designed to keep countries budgets and spending plans in check.
It sets out “six-pack” rules, which apply to all EU member states, while the “two-pack” rules, are limited to eurozone member countries.
Under the two pack rules, Governments have until October 15 each year to submit their budgets for approval while there are also rules around budget deficits and debt levels.
Despite the economic recovery here and stronger-than-expected tax returns, there have been concerns raised about the bullishness of the Government in October’s budget as well as its spending plans for 2016 ahead of a general election early next year.
Both the Fiscal Advisory Council and the Central Bank have voiced concerns about the expansionary nature of the budget plans announced by Minister Michael Noonan, which included swingeing cuts to the Universal Service Charge.
In addition, because of the bailout, Ireland is subject to stricter rules and the troika can demand changes to the budget if they believe the plans could impact the ability to repay loans.
There are two post-bailout programme appraisals each year and they will continue until 75pc of the billions of bailout loans are repaid.
Recent Eurostat figures show that government debt as a percentage to gross domestic product (GDP) was 102pc at the end of June, down from 114.5pc in the same period the previous year but the figures are still huge.
The European Commission recently said it expects our economic GDP growth to reach 6pc this year, three times the European average.
The EU's figures show that Ireland's budget deficit - the excess of spending over the tax take - is estimated at 2.2pc of gross domestic product (GDP) in 2015 and falling to 1.5pc of GDP next year and in 2017, compared with the upper limit of 3pc.
But gross debt - the amount the Government borrows to finance past and future spending - is to remain in the EU's top seven this year at 99.8pc of GDP, falling to 93.7pc in 2017.
The European Commission is expected to deliver its decisions on countries budgets on November 23 while the Troika will spend a week here meeting Department of Finance officials as well as the Central Bank.
Recently Spain was told to rewrite its budget after it fell foul of the rules.
A general election also looms in Spain.